70228 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

DEPARTMENT OF HEALTH AND 

HUMAN SERVICES 

Centers for Medicare & Medicaid 

Services 

42 CFR Parts 413 and 414 

[CMS–1577–F] 

RIN 0938–AQ27 

Medicare Program; End-Stage Renal 

Disease Prospective Payment System 

and Quality Incentive Program; 

Ambulance Fee Schedule; Durable 

Medical Equipment; and Competitive 

Acquisition of Certain Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies 

AGENCY: Centers for Medicare & 

Medicaid Services (CMS), HHS. 

ACTION: Final rule. 

SUMMARY: This final rule updates and 

makes certain revisions to the End-Stage 

Renal Disease (ESRD) prospective 

payment system (PPS) for calendar year 

(CY) 2012. We are also finalizing the 

interim final rule with comment period 

published on April 6, 2011, regarding 

the transition budget-neutrality 

adjustment under the ESRD PPS,. This 

final rule also sets forth requirements 

for the ESRD quality incentive program 

(QIP) for payment years (PYs) 2013 and 

2014. In addition, this final rule revises 

the ambulance fee schedule regulations 

to conform to statutory changes. This 

final rule also revises the definition of 

durable medical equipment (DME) by 

adding a 3-year minimum lifetime 

requirement (MLR) that must be met by 

an item or device in order to be 

considered durable for the purpose of 

classifying the item under the Medicare 

benefit category for DME. Finally, this 

final rule implements certain provisions 

of section 154 of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA) related 

to the durable medical equipment, 

prosthetics, orthotics and supplies 

(DMEPOS) Competitive Acquisition 

Program and responds to comments 

received on an interim final rule 

published January 16, 2009, that 

implemented these provisions of MIPPA 

effective April 18, 2009. (See the Table 

of Contents for a listing of the specific 

issues addressed in this final rule.) 

DATES: Effective dates: These regulations 

are effective on January 1, 2012. Also, 

effective January 1, 2012, we are 

finalizing the interim final rule with 

comment (‘‘Medicare Programs: Changes 

to the End-Stage Renal Disease 

Prospective Payment System Transition 

Budget-Neutrality Adjustment’’) 

published on April 6, 2011 (76 FR 

18930). Additionally, effective January 

12, 2012 the interim rule amending 42 

CFR Part 414, published on January 16, 

2009 (74 FR 2873), is confirmed as final. 

FOR FURTHER INFORMATION CONTACT:

Terri Deutsch, (410) 786–4533, for 

issues related to ESRD. 

Roechel Kujawa, (410) 786–9111, for 

issues related to ambulance services. 

Heidi Oumarou, (410) 786–7942, for 

issues related to the ESRD market 

basket. 

Shannon Kerr, (410) 786–3039, for 

issues related to the quality incentive 

program. 

Sandhya Gilkerson, (410) 786–4085, 

for issues related to DME MLR. 

Hafsa Bora, (410) 786–7899 or Iffat 

Fatima, (410) 786–6709, for DMEPOS 

Competitive Acquisition Program issues 

related to comments received on an 

interim final rule that implemented 

provisions of MIPPA effective April 18, 

2009. 

SUPPLEMENTARY INFORMATION: 

Addenda Are Only Available Through 

the Internet on the CMS Web Site 

In the past, a majority of the Addenda 

referred to throughout the preamble of 

our proposed and final rules were 

available in the Federal Register. 

However, the Addenda of the annual 

proposed and final rules will no longer 

be available in the Federal Register. 

Instead, these Addenda to the annual 

proposed and final rules will be 

available only through the Internet on 

the CMS Web site. The Addenda to the 

End-Stage Renal Disease (ESRD) 

Prospective Payment System (PPS) rules 

are available at: http://www.cms.gov/ 

ESRDPayment/PAY/list.asp. Readers 

who experience any problems accessing 

any of the Addenda to the proposed and 

final rules that are posted on the CMS 

Web site identified above should 

contact Lisa Hubbard at (410) 786–4533. 

Table of Contents 

To assist readers in referencing 

sections contained in this preamble, we 

are providing a Table of Contents. Some 

of the issues discussed in this preamble 

affect the payment policies, but do not 

require changes to the regulations in the 

Code of Federal Regulations (CFR). 

I. Calendar Year (CY) 2012 End-Stage Renal 

Disease (ESRD) Prospective Payment 

System (PPS) 

A. Background on the End-Stage Renal 

Disease Prospective Payment System 

B. Summary of the Proposed Provisions 

and Responses to Comments on the CY 

2012 ESRD PPS 

1. Updates to the Composite Rate and 

ESRD PPS Base Rate 

a. Composite Rate 

b. ESRD PPS Base Rate 

2. ESRD Bundled Market Basket 

a. Overview and Background 

b. Final Market Basket Update Increase 

Factor and Labor-Related Share for ESRD 

Facilities for CY 2012 

c. Productivity Adjustment 

d. Calculation of the ESRDB Market Basket 

Update, Adjusted for Multifactor 

Productivity for CY 2012 

3. Transition Budget-Neutrality 

Adjustment for CY 2011 

4. Transition Budget-Neutrality 

Adjustment for CY 2012 

5. Low-Volume Facility Provisions 

6. Update to the Drug Add-On to the 

Composite Rate Portion of the ESRD 

Blended Payment Rate 

a. Estimating Growth in Expenditures for 

Drugs and Biologicals in CY 2012 

b. Estimating per Patient Growth 

c. Applying the Growth Update to the Drug 

Add-On Adjustment 

d. Update to the Drug Add-On Adjustment 

for CY 2012 

7. Updates to the Wage Index Values and 

Wage Index Floor for the Composite Rate 

Portion of the Blended Payment and the 

ESRD PPS Payment 

a. Reduction to the ESRD Wage Index Floor 

b. Policies for Areas with no Hospital Data 

c. Wage Index Budget-Neutrality 

Adjustment 

d. ESRD PPS Wage Index Tables 

8. Drugs 

a. Vancomycin 

b. Drug Overfill 

9. Revisions to Patient-Level Adjustment 

for Body Surface Area (BSA) 

10. Revisions to the Outlier Policy 

a. Revisions Related to Outlier ESRD Drugs 

and Biologicals 

b. Exclusion of Automated Multi-Channel 

Chemistry (AMCC) Laboratory Tests 

From the Outlier Calculation 

c. Impact of Final Changes to the Outlier 

Policy 

D. Technical Corrections 

1. Training Add-On 

2. ESRD-Related Laboratory Test 

E. Clarifications to the CY 2011 ESRD PPS 

1. ICD–9–CM Diagnosis Codes 

2. Emergency Services to ESRD 

Beneficiaries 

F. Miscellaneous Comments 

II. End-Stage Renal Disease Quality Incentive 

Program for Payment Years (PYs) 2013 

and 2014 

A. Background for the End-Stage Renal 

Disease Quality Incentive Program for PY 

2013 and PY 2014 

B. Summary of the Proposed Provisions 

and Responses to Comments on the EndStage Renal Disease (ESRD) Quality 

Incentive Program (QIP) for PY 2013 and 

PY 2014 

1. PY 2013 ESRD QIP Requirements 

a. Performance Measures for the PY 2013 

ESRD QIP 

b. Performance Period and Case Minimum 

for the PY 2013 ESRD QIP 

c. Performance Standards for the PY 2013 

ESRD QIP 

d. Methodology for Calculating the Total 

Performance Score and Payment 

Reduction for the PY 2013 ESRD QIP 


emcdonald on DSK5VPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 70229 

2. PY 2014 ESRD QIP 

a. Performance Measures for the PY 2014 

ESRD QIP 

i. Anemia Management Measure 

ii. Dialysis Adequacy Measure 

iii. Vascular Access Type (VAT) Measure 

iv. Vascular Access Infections Measure 

v. Standardized Hospitalization Ratio 

(SHR)-Admissions Measure 

vi. Minimum Case Number for Clinical 

Measures and Other Considerations 

vii. National Healthcare Safety Network 

(NHSN) Dialysis Event Reporting 

Measure 

viii. Patient Experience of Care Survey 

Usage Measure 

ix. Mineral Metabolism Reporting Measure 

3. Performance Period for the PY 2014 

ESRD QIP 

4. Performance Standards and the 

Methodology for Calculating the Total 

Performance Score for the PY 2014 ESRD 

QIP 

i. Performance Standards for the PY 2014 

ESRD QIP 

ii. Setting Performance Benchmarks and 

Thresholds 

iii. Scoring Provider and Facility 

Performance on Clinical Measures Based 

on Achievement 

iv. Scoring Provider/Facility Performance 

on Clinical Measures Based on 

Improvement 

v. Calculating the VAT Measure Score 

vi. Calculating the NHSN Dialysis Event 

Reporting Measure, Patient Experience 

Survey Usage Reporting Measure and 

Mineral Metabolism Reporting Measure 

Scores 

vii. Weighting of the PY 2014 ESRD QIP 

Measures and Calculation of the PY 2014 

ESRD QIP 

viii. Examples for 2014 ESRD QIP 

Performance Scoring Model 

6. Payment Reductions for the PY 2014 

ESRD QIP 

7. Public Reporting Requirements 

8. Future QIP Measures 

9. Process of Updating Measures 

III. Ambulance Fee Schedule 

A. Summary of Proposed Provisions 

1. Section 106 of the Medicare and 

Medicaid Extenders Act of 2010 (MMEA) 

a. Amendment to Section 1834(l)(13) of the 

Act 

b. Amendment to Section 146(b)(1) of 

MIPPA 

c. Amendment to Section 1834(l)(12) of the 

Act 

2. Technical Correction 

B. Response to Comments 

IV. Durable Medical Equipment and Supplies 

A. Background for Durable Medical 

Equipment (DME) and Supplies 

B. Current Issues 

C. Overview of the Provisions of the 

Proposed Durable Medical Equipment 

(DME) Regulation 

D. Summary of the Proposed Provisions 

and Responses to Comments on the 

Definition of Durable Medical 

Equipment (DME) and the 3-Year 

Minimum Lifetime Requirement (MLR) 

1. Application of the 3-Year MLR to Items 

Currently Covered as DME and to 

Supplies and Accessories of Covered 

DME 

2. Application of the 3-Year MLR to MultiComponent Devices 

V. Interim Final Rule Regarding the 

Competitive Acquisition Program for 

Certain Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) 

A. Background 

1. Legislative and Regulatory History of the 

DMEPOS Competitive Bidding Program 

2. The MIPPA and the Medicare DMEPOS 

Competitive Bidding Program 

B. Overview of the Interim Final Rule 

C. Summary of the Interim Final Rule 

Provisions and Response to Comments 

on Changes to the Competitive 

Acquisition of Certain Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies (DMEPOS) by Certain 

Provisions of the Medicare 

Improvements for Patients and Providers 

Act of 2008 (MIPPA) 

1. General Changes to the DMEPOS 

Competitive Bidding Program 

a. Temporary Delay of the Medicare 

DMEPOS Competitive Bidding Program 

b. Supplier Feedback on Missing Covered 

Documents 

c. Disclosure of Subcontractors and Their 

Accreditation Status Under the 

Competitive Bidding Program 

d. Exemption From Competitive Bidding 

for Certain DMEPOS 

e. Exclusion of Group 3 Complex 

Rehabilitative Power Wheelchairs 

2. Round 1 Changes to the Competitive 

Bidding Program 

a. Rebidding of the ‘‘Same Areas’’ as the 

Previous Round 1, Unless Otherwise 

Specified 

b. Rebidding of the ‘‘Same Items and 

Services’’ as the Previous Round 1, 

Unless Otherwise Specified 

D. Other Public Comments Received on the 

January 16, 2009 Interim Final Rule 

VI. Collection of Information Requirements 

VII. Economic Analyses 

VIII. Regulatory Flexibility Act Analysis 

IX. Unfunded Mandates Reform Act Analysis 

X. Federalism Analysis 

XI. Files Available to the Public via the 

Internet 

Regulations Text 

Acronyms 

Because of the many terms to which 

we refer by acronym in this final rule, 

we are listing the acronyms used and 

their corresponding meanings in 

alphabetical order below: 

AMCC Automated Multi-Channel 

Chemistry 

ASP Average Sales Price 

AV Arteriovenous 

BLS Bureau of Labor Statistics 

BMI Body Mass Index 

BSA Body Surface Area 

CY Calendar Year 

CBSA Core-Based Statistical Area 

CDC Centers for Disease Control and 

Prevention 

CLABSI Central Line Access Bloodstream 

Infections 

CFR Code of Federal Regulations 

CIP Core Indicators Project 

CMS Centers for Medicare & Medicaid 

Services 

CPM Clinical Performance Measure 

CPT Current Procedural Terminology 

CROWNWeb Consolidated Renal 

Operations in a Web-Enabled Network 

DFC Dialysis Facility Compare 

DFR Dialysis Facility Report 

DME Durable Medical Equipment 

ESA Erythropoiesis stimulating agent 

ESRD End-Stage Renal Disease 

ESRDB End-Stage Renal Disease Bundled 

FDA Food and Drug Administration 

FI/MAC Fiscal Intermediary/Medicare 

Administrative Contractor 

FY Fiscal Year 

GDP Gross Domestic Product 

HAI Healthcare-associated Infections 

HCPCS Healthcare Common Procedure 

Coding System 

HD Hemodialysis 

HHD Home Hemodialysis 

ICD–9–CM International Classification of 

Diseases, 9th Edition, Clinical 

Modifications 

ICH CAHPS In-Center Hemodialysis 

Consumer Assessment of Healthcare 

Advisors 

IGI IHS Global Insight 

IPPS Inpatient Prospective Payment System 

KDIGO Kidney Disease: Improving Global 

Outcomes 

KDOQI Kidney Disease Outcome Quality 

Initiative 

Kt/V A measure of dialysis adequacy where 

K is dialyzer clearance, t is dialysis time, 

and V is total body water volume 

LDO Large Dialysis Organization 

MAP Medicare Allowable Payment 

MCP Monthly Capitation Payment 

MIPPA Medicare Improvements for Patients 

and Providers Act of 2008 (Pub. L. 110– 

275) 

MMA Medicare Prescription Drug, 

Improvement and Modernization Act of 

2003 

MMEA Medicare and Medicaid Extenders 

Act of 2010 Public Law 111–309 

MFP Multifactor Productivity 

NHSN National Healthcare Safety Network 

NQF National Quality Forum 

PD Peritoneal Dialysis 

PFS Physician Fee Schedule 

PPS Prospective Payment System 

PSR Performance Score Report 

PY Payment Year 

QIP Quality Incentive Program 

REMIS Renal Management Information 

System 

RFA Regulatory Flexibility Act 

RUL Reasonable Useful Lifetime 

SBA Small Business Administration 

SIMS Standard Information Management 

System 

SHR Standardized Hospitalization Ratio 

SSA Social Security Administration 

The Act Social Security Act 

The Affordable Care Act The Patient 

Protections and Affordable Care Act 

URR Urea reduction ratio 

VBP Value Based Purchasing 


emcdonald on DSK5VPTVN1PROD with RULES2
70230 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

I. Calendar Year (CY) 2012 End-Stage 

Renal Disease (ESRD) Prospective 

Payment System (PPS) 

A. Background on the End-Stage Renal 

Disease Prospective Payment System 

On August 12, 2010, we published in 

the Federal Register, a final rule (75 FR 

49030 through 49214), entitled, ‘‘EndStage Renal Disease Prospective 

Payment System’’, hereinafter referred 

to as the CY 2011 ESRD PPS final rule. 

In the CY 2011 ESRD PPS final rule, we 

implemented a case-mix adjusted 

bundled PPS for Medicare outpatient 

ESRD dialysis patients beginning 

January 1, 2011, in accordance with 

section 1881(b)(14) of the Social 

Security Act (the Act), as added by 

section 153(b) of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA). The 

ESRD PPS replaced the basic case-mix 

adjusted composite payment system and 

the methodologies for the 

reimbursement of separately billable 

outpatient ESRD services. 

Also, section 1881(b)(14)(F) of the 

Act, as added by section 153(b) of 

MIPPA and amended by section 3401(h) 

of Public Law 111–148, the Affordable 

Care Act, established that beginning CY 

2012, and each subsequent year, the 

Secretary shall reduce the market basket 

increase factor by a productivity 

adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. 

In the CY 2011 ESRD PPS final rule 

(75 FR 49030), the Centers for Medicare 

& Medicaid Services (CMS) finalized the 

following: 

• A base rate of $229.63 per treatment 

for renal dialysis services (but 

postponed payment for oral-only renal 

dialysis drugs under the ESRD PPS until 

January 1, 2014) that applies to both 

adult and pediatric dialysis patients 

prior to the application of any case-mix 

adjustments. This amount included the 

2 percent reduction for budget 

neutrality required by MIPPA, a one 

percent reduction for estimated outlier 

payments, and a reduction to account 

for estimated payments for case-mix and 

the low-volume payment adjustments. 

• A 4-year transition period (for those 

ESRD facilities that elected to receive 

blended payments during the transition) 

during which ESRD facilities receive a 

blend of payments under the prior basic 

case-mix adjusted composite payment 

system and the new ESRD PPS. 

Although the statute uses the term 

‘‘phase-in’’, we use the term 

‘‘transition’’ to be consistent with other 

Medicare payment systems. 

• A ¥3.1 percent transition budgetneutrality adjustment to ensure that 

overall spending under the ESRD PPS 

did not increase as a result of the 

provision that permits ESRD facilities to 

be excluded from the 4-year transition. 

• Payment adjustments for dialysis 

treatments furnished to adults for 

patient age, body surface area (BSA), 

low body mass index (BMI), onset of 

dialysis, and six specified comorbidities. 

• A home or self-care dialysis training 

payment adjustment of $33.44 per 

treatment paid in addition to the casemix adjusted per treatment amount, 

which is wage adjusted and applies to 

claims for patients trained by ESRD 

facilities certified to provide home 

dialysis training. 

• Payment adjustments for dialysis 

treatments furnished to pediatric 

patients for patient age and dialysis 

modality. 

• A low-volume payment adjustment 

for adult patients of 18.9 percent that 

applies to the otherwise applicable casemix adjusted payment rate for facilities 

that qualify as low-volume ESRD 

facilities. 

• An outlier payment policy that 

provides an additional payment to 

ESRD facilities treating high cost, 

resource-intensive patients. 

• The wage index adjustment that is 

applied when calculating the ESRD PPS 

payment rates in order to account for 

geographic differences in area wage 

levels. 

• An ESRD bundled (ESRDB) market 

basket index used to project prices in 

the costs of goods and services used to 

furnish outpatient maintenance dialysis. 

In addition, on April 6, 2011, we 

published an interim final rule with 

comment period in the Federal Register 

(76 FR 18930), entitled ‘‘Changes in the 

End-Stage Renal Disease Prospective 

Payment System Transition BudgetNeutrality Adjustment’’, which revised 

the ESRD transition budget-neutrality 

adjustment for CY 2011. In the interim 

final rule, we revised the 3.1 percent 

transition budget-neutrality adjustment 

reduction to a zero percent transition 

budget-neutrality adjustment for renal 

dialysis services furnished on April 1, 

2011 through December 31, 2011. 

B. Summary of the Proposed Provisions 

and Responses to Comments on the CY 

2012 ESRD PPS 

The proposed rule entitled, ‘‘Medicare 

Program; Changes to the End-Stage 

Renal Disease Prospective Payment 

System for CY 2012, End-Stage Renal 

Disease Quality Incentive Program for 

PY 2013 and PY 2014; Ambulance Fee 

Schedule; and Durable Medical 

Equipment’’ (76 FR 40498) (the 

‘‘proposed rule’’) appeared in the 

Federal Register on July 8, 2011, with 

a comment period that ended on August 

30, 2011 (76 FR 40498). In that proposed 

rule, for the ESRD PPS, we proposed to 

(1) make a number of routine updates 

for CY 2012, (2) implement the second 

year of the transition, (3) make several 

policy changes and clarifications, and 

(4) technical changes with regard to the 

CY 2011 ESRD PPS final rule. We 

received approximately 40 public 

comments on the ESRD PPS proposals, 

including comments from dialysis 

facilities, the national organizations 

representing dialysis facilities, 

nephrologists, patients, pharmaceutical 

manufacturers, hospitals and their 

representatives, and MedPAC. In this 

final rule, we provide a summary of 

each proposed provision, a summary of 

the public comments received, our 

responses to them, and what we are 

finalizing for the CY 2012 ESRD PPS in 

this final rule. 

1. Updates to the Composite Rate and 

ESRD PPS Base Rate 

a. Composite Rate 

Section 1881(b)(14)(E)(i) of the Act 

requires a 4-year transition under the 

ESRD PPS. For CY 2012, under 42 CFR 

413.239(a)(2), ESRD facilities that 

receive payment through the transition 

receive a blended rate equal to the sum 

of 50 percent of the ESRD PPS amount 

and 50 percent of the basic case-mix 

adjusted composite payment amount. 

Accordingly, we continue to update the 

composite rate portion of the blended 

payment during the 4-year transition 

(that is, CYs 2011 through 2013). For a 

historical perspective of the basic casemix adjusted composite payment system 

for ESRD facilities, including the CY 

2011 update to the composite rate 

portion of the blended rate, please see 

the CY 2011 Physician Fee Schedule 

(PFS) proposed rule, (75 FR 40164) and 

the CY 2011 PFS final rule (75 FR 49031 

through 49033). In addition, we discuss 

the CY 2012 drug add-on and the 

updated wage index values for the 

composite rate portion of the blended 

payment in sections I.C.6 and I.C.7, 

respectively, of this final rule. 

Under section 1881(b)(14)(F)(ii) of the 

Act, for years during which the 

transition applies, the composite rate 

portion of the blend shall be annually 

increased by the ESRDB market basket, 

which for CY 2012 and each subsequent 

year, shall be reduced by the 

productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act. 

In section I.B.2.b of this final rule, we 

are finalizing the CY 2012 ESRDB 

market basket update of 3.0 percent, 

based on the third quarter 2011 IGI 

forecast of the ESRDB market basket. In 


emcdonald on DSK5VPTVN1PROD with RULES2
Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 70231 

section I.B.2.c of this final rule, we are 

finalizing the CY 2012 MFP adjustment 

of 0.9 percent based on the third quarter 

2011 IGI forecast of the MFP. 

We proposed to add the CY 2011 Part 

D per treatment amount (that is, $0.49) 

to the CY 2011 composite rate in order 

to update the Part D amount for CY 2012 

using the ESRDB market basket minus 

the productivity adjustment (76 FR 

40502). We believed this approach is 

preferable to applying a growth factor to 

the $0.49 that is based on the rates for 

overall prescription drug prices that 

were used in the National Health 

Expenditure Projections, as we did for 

the establishment of the CY 2011 ESRD 

PPS base rate, because it is consistent 

with the update applied to the ESRD 

PPS base rate, which includes a per 

treatment amount for former part D 

drugs (that is, $0.49). We sought 

comment on our proposal to add the CY 

2011 part D payment amount (that is, 

$0.49) to the composite rate portion of 

the blended payment and update it 

using the ESRDB market basket minus 

productivity adjustment. The basis for 

the first part of the transition budgetneutrality adjustment (that is, the 

calculation of the $0.49 part D amount) 

was set forth in the CY 2011 ESRD PPS 

final rule at 75 FR 49082. The comments 

and our responses are set forth below. 

Comment: Several commenters 

expressed concerns about the proposed 

methodology to add the former Part D 

oral drug amount ($0.49) to the 

composite rate and then apply the 

market basket reduced by the 

productivity adjustment. Some 

commenters believe that updating the 

payment for oral equivalents of 

injectable drugs by the ESRD market 

basket minus productivity could set a 

precedent that might affect access to 

care for preferred agents when oral 

drugs are included in the bundle in 

2014. One commenter stated that it is 

inappropriate to apply the productivity 

adjustment to full transition blended 

payment. Instead, they believe the 

blended payment amount, for CY 2012, 

should be split with 50 percent of it 

paid at the PPI-inflated market basket 

rates and 50 percent of it adjusted using 

the update factors because the transition 

blended payment rate is based on 50 

percent of the PPS payment rate and 50 

percent on the old composite rate plus 

drug add-on rate. One commenter 

acknowledged that by using the split 

methodology, ESRD PPS would be 

updated differently than other payment 

systems, but the commenter believed 

that this distinction was appropriate 

because of the unique nature of the 

program and because drugs represent 

such a large portion of the overall costs 

incurred by dialysis facilities. 

Response: Beginning in 2012, section 

1881(b)(14)(F) of the Act, requires us to 

annually update the ESRD PPS payment 

amounts and the composite rate portion 

of the blended transition payment by an 

ESRD market basket increase that is 

reduced by the productivity adjustment 

described in section 1886(b)(3)(B)xi)(II) 

of the Act. Given that the same update 

is used for both ESRD PPS and 

transition blended payments, and given 

the ESRD PPS base rate includes a 

portion of former Part D drugs, we 

proposed to add the $0.49 part D drug 

amount to the composite rate portion of 

the blended payment because we 

wanted to update it consistent with how 

we update the ESRD PPS base rate. 

Further, because the statute requires an 

update using the ESRDB market basket 

less productivity and the ESRDB market 

basket is comprised of the Producer 

Price Index (PPI) for prescription drugs 

as a proxy for measuring price growth 

in ESRD-related drugs, we believe that 

our proposal to add the $0.49 to the 

composite rate and update it using the 

ESRDB market basket less productivity 

is appropriate. Therefore, for CY 2012, 

the composite rate payment, including 

the $0.49 Part D amount, will be 

updated by the ESRDB market basket 

less productivity. With regard to the 

commenter’s concerns that the addition 

of $0.49 to the composite rate would set 

a precedent that might affect access to 

care for preferred agents when oral-only 

drugs are included in the bundle in 

2014, we note that we did not propose 

any payment policies for the oral-only 

drugs in the proposed rule. We will 

address in future rulemaking oral-only 

drugs and the bundled amount 

established in CY 2011, and there will 

be an opportunity for public comment 

on any future proposals we may make. 

Consequently, for CY 2012, the 

composite rate portion of the ESRD PPS 

blended payment is $141.94. The 

$141.94 reflects the addition of the CY 

2011 part D per treatment amount 

($0.49) to the CY 2011 composite rate of 

$138.53, and application of the ESRDB 

market basket minus productivity 

adjustment ($138.53 + 0.49 = $139.02; 

$139.02 × 1.021 = $141.94). 

b. ESRD PPS Base Rate 

We described the development of the 

ESRD PPS per-treatment base rate in the 

CY 2011 ESRD PPS final rule (75 FR 

49071) and established Medicare 

regulations at 42 CFR 413.220 and 

413.230. The CY 2011 ESRD PPS final 

rule also provides a detailed discussion 

of the methodology used to calculate the 

ESRD PPS base rate and the 

computation of factors used to adjust 

the ESRD PPS base rate for projected 

outlier payments and budget-neutrality 

in accordance with sections 

1881(b)(14)(D)(ii) and 1881(b)(14)(A)(ii) 

of the Act, respectively (75 FR 49071 

through 49082). Specifically, the ESRD 

PPS base rate was developed from CY 

2007 claims (that is, the lowest per 

patient utilization year), updated to CY 

2011, and represented the average per 

treatment Medicare allowable payment 

(MAP) for composite rate and separately 

billable services. In addition, in 

accordance with § 413.230, the ESRD 

PPS base rate is adjusted for the patientspecific case-mix adjustments, 

applicable facility adjustments, 

geographic differences in area wage 

levels using an area wage index, as well 

as any outlier payment or training addon adjustments. For CY 2011, the ESRD 

PPS base rate was $229.63 (75 FR 

49082). 

As required by section 1881(b)(14)(F) 

of the Act, in this final rule, for CY 

2012, we applied the 2.1 percent 

increase (ESRDB market basket update 

less productivity) to the CY 2011 ESRD 

PPS base rate of $229.63, which results 

in an ESRD PPS base rate for CY 2012 

of $234.45 (229.63 × 1.021 = 234.45). 

The ESRD PPS base rate applies to the 

ESRD PPS portion of the blended 

payments under the transition and to 

the ESRD PPS payments. In addition, as 

discussed in section I.C.7.c of the 

proposed rule (76 FR 40509), we 

proposed to apply the wage index 

budget-neutrality adjustment factor to 

the ESRD PPS base rate in CY 2012. 

We did not receive any comments on 

this proposal. Therefore, we are 

finalizing the policy to apply the wage 

index budget-neutrality adjustment to 

the ESRD PPS base rate. For CY 2012, 

we apply the wage index budgetneutrality adjustment factor of 1.001520 

to the updated base rate (that is, 

$234.45), yielding an ESRD PPS wageindex budget-neutrality adjusted base 

rate for CY 2012 of $234.81 ($234.45 × 

1.001520 = 234.81). 

2. ESRD Bundled Market Basket 

a. Overview and Background 

In accordance with section 

1881(b)(14)(F)(i) of the Act, as added by 

section 153(b) of MIPPA and amended 

by section 3401(h) of the Affordable 

Care Act, beginning in 2012, the ESRD 

bundled payment amounts are required 

to be annually increased by an ESRD 

market basket increase factor that is 

reduced by the productivity adjustment 

described in section 1886(b)(3)(B)(xi)(II) 

of the Act. The statute further provides 

that the market basket increase factor 


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should reflect the changes over time in 

the prices of an appropriate mix of 

goods and services used to furnish renal 

dialysis services. Under section 

1881(b)(14)(F)(ii) of the Act, as added by 

section 153(b) of MIPPA and amended 

by section 3401(h) of the Affordable 

Care Act, the ESRD bundled (ESRDB) 

rate market basket increase factor will 

also be used to update the composite 

rate portion of ESRD payments during 

the ESRD PPS transition period from 

2011 through 2013; though beginning in 

2012, such market basket increase factor 

will be reduced by the productivity 

adjustment. As a result of amendments 

by section 3401(h) of the Affordable 

Care Act, a full market basket was 

applied to the composite rate portion of 

the blended payment in CY 2011 during 

the first year of the transition. 

b. Final Market Basket Update Increase 

Factor and Labor-Related Share for 

ESRD facilities for CY 2012 

As required under section 

1881(b)(14)(F) of the Act, CMS 

developed an all-inclusive ESRDB input 

price index (75 FR 49151 through 

49162). Although ‘‘market basket’’ 

technically describes the mix of goods 

and services used to produce ESRD care, 

this term is also commonly used to 

denote the input price index (that is, 

cost categories, their respective weights, 

and price proxies combined) derived 

from that market basket. Accordingly, 

the term ‘‘ESRDB market basket’’, as 

used in this document, refers to the 

ESRDB input price index. 

We proposed to use the same 

methodology described in the CY 2011 

ESRD PPS final rule (75 FR 49151 

through 49162) to compute the CY 2012 

ESRDB market basket increase factor 

and labor-related share based on the 

best available data (76 FR 40503). 

Consistent with historical practice, we 

estimate the ESRDB market basket 

update based on IHS Global Insight 

(IGI), Inc.’s forecast using the most 

recently available data. IGI is a 

nationally recognized economic and 

financial forecasting firm that contracts 

with CMS to forecast the components of 

the market baskets. 

Using this method and the IGI forecast 

for the first quarter of 2011 of the CY 

2008-based ESRDB market basket (with 

historical data through the fourth 

quarter of 2010), and consistent with 

our historical practice of estimating 

market basket increases based on the 

best available data, the proposed CY 

2012 ESRDB market basket increase 

factor was 3.0 percent. We also 

proposed that if more recent data 

became subsequently available (for 

example, a more recent estimate of the 

market basket), we would use that data, 

if appropriate, to determine the CY 2012 

update in the final rule. Therefore, we 

used the IGI’s third quarter 2011 

forecast with history through the second 

quarter of 2011, and as discussed below, 

the projected market basket update for 

CY 2012 that we are finalizing is 3.0 

percent based on the 2008-based ESRDB 

market basket. 

Additionally, we proposed to 

continue to use a labor-related share of 

41.737 percent for CY 2012 for the ESRD 

PPS payment (76 FR 40503), which was 

finalized in the CY 2011 ESRD final rule 

(75 FR 49161). We also proposed to 

continue to use a labor-related share of 

53.711 percent for the ESRD composite 

rate portion of the blended payment for 

all years of the transition (76 FR 40503). 

This labor-related share was developed 

from the labor-related components of 

the 1997 ESRD composite rate market 

basket that was finalized in the 2005 

PFS final rule (70 FR 70168), and is 

consistent with the mix of labor-related 

services paid under the composite rate, 

as well as the method finalized in the 

CY 2011 ESRD PPS final rule (75 FR 

49116). 

The comments we received on these 

proposals and our responses are set 

forth below. 

Comment: Several commenters 

believe that there should be more 

transparency in the calculation of the 

market basket update and are concerned 

about the lack of data available to 

validate the calculations. 

Response: We agree that the public 

should be able to replicate the 

methodology used to construct the 

ESRDB market basket. We disagree, 

however, that CMS has not been fully 

transparent in the calculation of the 

market basket update. In the CY 2011 

ESRD final rule (75 FR 49151 through 

49161), we provided the public with the 

cost shares for the ESRDB market basket 

and the data sources for the 

establishment of those cost shares. We 

also provided a detailed description of 

the data sources used to develop the 

ESRDB market basket cost weights and 

the price proxies used in the ESRDB 

market basket were listed for each cost 

category, which are based on data 

maintained and published by the 

Bureau of Labor Statistics (BLS). We 

refer the commenter to the BLS 

regarding any specific information on 

the detailed price proxies. In addition, 

to assist the commenter and other 

interested stakeholders in locating these 

price proxies on the BLS Web site, we 

have provided the individual BLS series 

codes for the indexes in the price proxy 

discussion of the final rule and the 

directions for obtaining the data through 

the BLS Web site. These two pieces of 

information, the cost weights and the 

price proxies, allow the public to 

replicate the historical time series of the 

ESRDB market basket. 

The forecasts of the individual price 

proxies used in a market basket are 

developed independently by IGI, a 

nationally recognized economic and 

financial forecasting firm. We purchase 

IGI’s detailed price proxy projections for 

use in the Medicare market baskets. As 

a matter of practice, we publish all of 

the underlying detail for each price 

proxy for the historical period. 

However, because the projections of 

each individual price proxy are 

proprietary, we aggregate those 

projections into higher level categories 

and then publish the results with a onequarter lag on the CMS Web site. This 

is consistent with the level of data 

provided for other PPS payment system 

market baskets. The ESRDB market 

basket data, including the detail as 

described above, is published on the 

CMS Web site at the following link: 

(https://www.cms.gov/

MedicareProgramRatesStats/04_

MarketBasketData.asp#TopOfPage). 

After considering the public 

comments received and for the reasons 

we previously articulated, we are 

finalizing our proposals to continue to 

use the ESRDB market basket forecasts 

for the ESRD PPS and transition 

payment updates. Therefore, we are 

finalizing the ESRDB market basket 

update of 3.0 percent, based on the IGI 

third quarter forecast of the ESRDB 

market basket. We did not receive any 

public comments regarding our proposal 

to continue to use the labor-related 

shares for the ESRD PPS portion and 

composite portion of the blended 

payment during the transition period. 

Therefore, we are also finalizing the 

proposal to continue to use the laborrelated share of 41.737 percent for the 

CY 2012 ESRD PPS payment and the 

labor-related share of 53.711 percent for 

the CY 2012 ESRD composite rate 

portion of the blended payment, for 

those facilities that elected to transition 

to the bundled ESRD PPS. 

c. Productivity Adjustment 

The ESRDB market basket must be 

annually adjusted by changes in 

economy-wide productivity. 

Specifically, under section 

1881(b)(14)(F) of the Act, as amended by 

section 3401(h) of the Affordable Care 

Act, for CY 2012 and each subsequent 

year, the ESRD market basket percentage 

increase factor shall be reduced by the 

productivity adjustment described in 

section 1886(b)(3)(B)(xi)(II) of the Act. 

The statute defines the productivity 


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adjustment to be equal to the 10-year 

moving average of changes in annual 

economy-wide private nonfarm business 

multifactor productivity (MFP) (as 

projected by the Secretary for the 10- 

year period ending with the applicable 

fiscal year, year, cost reporting period, 

or other annual period) (the ‘‘MFP 

adjustment’’). The BLS is the agency 

that publishes the official measure of 

private nonfarm business MFP. Please 

see http://www.bls.gov/mfp to obtain the 

BLS historical published MFP data. 

CMS notes that the proposed and final 

methodology for calculating and 

applying the MFP adjustment to the 

ESRD payment update is similar to the 

methodology used in other payment 

systems, as required by section 3401 of 

the Affordable Care Act. 

The projection of MFP is currently 

produced by IGI, an economic 

forecasting firm. In order to generate a 

forecast of MFP, IGI replicated the MFP 

measure calculated by the BLS using a 

series of proxy variables derived from 

IGI’s U.S. macroeconomic models. 

These models take into account a very 

broad range of factors that influence the 

total U.S. economy. IGI forecasts the 

underlying proxy components such as 

gross domestic product (GDP), capital, 

and labor inputs required to estimate 

MFP and then combines those 

projections according to the BLS 

methodology. In Table 1 below, we 

identify each of the major MFP 

component series employed by the BLS 

to measure MFP. We also provide the 

corresponding concepts forecasted by 

IGI and determined to be the best 

available proxies for the BLS series. 

IGI found that the historical growth 

rates of the BLS components used to 

calculate MFP and the IGI components 

identified are consistent across all series 

and therefore suitable proxies for 

calculating MFP. We have included 

below a more detailed description of the 

methodology used by IGI to construct a 

forecast of MFP, which is aligned 

closely with the methodology employed 

by the BLS. For more information 

regarding the BLS method for estimating 

productivity, please see the following 

link: http://www.bls.gov/mfp/ 

mprtech.pdf. 

At the time of the development of this 

CY 2012 final rule, the BLS published 

a historical time series of private 

nonfarm business MFP for 1987 through 

2010, with 2010 being a preliminary 

value. Using this historical MFP series 

and the IGI forecasted series, IGI has 

developed a forecast of MFP for 2011 

through 2021, as described below. We 

note that the historical MFP series and 

the IGI forcasted series are updates from 

those used at the time of the proposed 

rule (1987 through 2009, and 2010 

through 2021, respectively). 

To create a forecast of BLS’ MFP 

index, the forecasted annual growth 

rates of the ‘‘non-housing, 

nongovernment, non-farm, real GDP,’’ 

‘‘hours of all persons in private nonfarm 

establishments adjusted for labor 

composition,’’ and ‘‘real effective capital 

stock’’ series (ranging from 2011 to 

2021) are used to ‘‘grow’’ the levels of 

the ‘‘real value-added output,’’ ‘‘private 

non-farm business sector labor input,’’ 

and ‘‘aggregate capital input’’ series 

published by the BLS. Projections of the 

‘‘hours of all persons’’ measure are 

calculated using the difference between 

the projected growth rates of real output 

per hour and real GDP. This difference 

is then adjusted to account for changes 

in labor composition in the forecast 

interval. 

Using these three key concepts, MFP 

is derived by subtracting the 

contribution of labor and capital inputs 

from output growth. However, in order 

to estimate MFP, we need to understand 

the relative contributions of labor and 

capital to total output growth. 

Therefore, two additional measures are 

needed to operationalize the estimation 

of the IGI MFP projection: Labor 

compensation and capital income. The 

sum of labor compensation and capital 

income represents total income. The 

BLS calculates labor compensation and 

capital income (in current dollar terms) 

to derive the nominal values of labor 

and capital inputs. IGI uses the 

‘‘nongovernment total compensation’’ 

and ‘‘flow of capital services from the 

total private non-residential capital 

stock’’ series as proxies for the BLS’ 

income measures. These two proxy 

measures for income are divided by 

total income to obtain the shares of 

labor compensation and capital income 

to total income. In order to estimate 

labor’s contribution and capital’s 

contribution to the growth in total 

output, the growth rates of the proxy 

variables for labor and capital inputs are 

multiplied by their respective shares of 

total income. These contributions of 

labor and capital to output growth is 

subtracted from total output growth to 

calculate the ‘‘change in the growth 

rates of multifactor productivity:’’ 

MFP = Total output growth ¥ ((labor 

input growth * labor compensation 

share) + (capital input growth * 

capital income share)) 

The change in the growth rates (also 

referred to as the compound growth 

rates) of the IGI MFP are multiplied by 

100 in order to calculate the percent 

change in growth rates (the percent 

change in growth rates are published by 


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the BLS for its historical MFP measure). 

Finally, the growth rates of the IGI MFP 

are converted to index levels based to 

2005 to be consistent with the BLS’ 

methodology. For benchmarking 

purposes, the historical growth rates of 

IGI’s proxy variables were used to 

estimate a historical measure of MFP, 

which was compared to the historical 

MFP estimate published by the BLS. 

The comparison revealed that the 

growth rates of the components were 

consistent across all series, and 

therefore validated the use of the proxy 

variables in generating the IGI MFP 

projections. The resulting MFP index 

was then interpolated to a quarterly 

frequency using the Bassie method for 

temporal disaggregation. The Bassie 

technique utilizes an indicator (pattern) 

series for its calculations. IGI uses the 

index of output per hour (published by 

the BLS) as an indicator when 

interpolating the MFP index. 

The comments we received on this 

proposal and our response are set forth 

below. 

Comment: One commenter stated that 

the factors used in the productivity 

adjustor, which are mostly derived from 

capital and labor related economic 

measures, are not appropriate for use to 

modify the market basket costs of drugs, 

which are consumable items. One 

commenter further believes that ESRD 

PPS should be treated differently than 

other PPS payment systems because 

drugs represent such a large portion of 

the overall costs incurred by dialysis 

services. One pharmaceutical company 

expressed concern about the proposal to 

apply the productivity adjustment to the 

Part D oral drug portion of the blended 

payment. 

Response: In accordance with section 

1881(b)(14)(F)(i) of the Act, beginning in 

2012, all renal dialysis services 

included in the ESRD bundle are 

required to be annually increased by an 

ESRD market basket increase factor that 

is reduced by the productivity 

adjustment described in section 

1886(b)(3)(B)(xi)(II) of the Act. 

Therefore, CMS is statutorily required to 

update ESRD PPS payments by a market 

basket update less productivity. We also 

note that CMS is statutorily required to 

update the ESRD composite rate portion 

of the blended payment by the ESRDB 

market basket less productivity. During 

the transition, any items or services 

included in the bundle have been 

factored into the cost shares for the 

ESRDB market basket; as such, the costs 

associated with oral drugs that were 

formerly paid under Part D are included 

in the ESRDB market basket cost share 

weight for drugs. As finalized in the CY 

2011 ESRD final rule (75 FR 49156), the 

market basket drug cost share weight 

accounts for all drugs included in the 

ESRD bundled payment, including 

ESRD-related oral drugs with injectable 

equivalents that were formerly covered 

under Medicare Part D as well as the 

costs associated with any other drugs as 

reported on the ESRD Medicare Cost 

Report. In 2014, any changes to the 

bundle will be factored into a revised 

ESRDB market basket and be subject to 

notice and comment rulemaking. 

Therefore, although drugs account for a 

larger proportion of expenses in the 

ESRDB market basket than in some 

other provider-type PPS market baskets, 

we will continue to update the ESRD 

payments as statutorily mandated by the 

Congress. As such, for CY 2012, the 

ESRD PPS payment rate and the 

composite portion of the blended 

payment will be increased by the 

estimated market basket update less 

productivity, 2.1 percent (3.0 percent 

ESRDB market basket less 0.9 

percentage point MFP adjustment), 

which is described in more detail 

below. 

After careful consideration of the 

public comments and to satisfy the 

statutory requirement for ESRD payment 

updates mentioned above, we are 

finalizing our proposed method for 

calculating and applying the MFP 

adjustment to the ESRDB market basket. 

d. Calculation of the ESRDB Market 

Basket Update, Adjusted for Multifactor 

Productivity for CY 2012 

Under section 1881(b)(14)(F)(i) of the 

Act, beginning in 2012, ESRD PPS 

payment amounts and the composite 

rate portion of the transition blended 

payment amounts shall be annually 

increased by an ESRD market basket 

percentage increase factor reduced by a 

productivity adjustment. 

We proposed to estimate the ESRDB 

market basket percentage for CY 2012 

based on the CY 2008-based ESRDB 

market basket (76 FR 40504). In order to 

calculate the MFP-adjusted update for 

the ESRDB market basket during the 

transition period, we proposed that the 

MFP percentage adjustment be 

subtracted from the CY 2012 market 

basket update calculated using the CY 

2008-based ESRDB market basket (75 FR 

40504). We proposed that the end of the 

10-year moving average of changes in 

the MFP should coincide with the end 

of the appropriate CY update period. 

Since the market basket update is 

reduced by the MFP adjustment to 

determine the annual update for the 

ESRD PPS and the ESRD composite rate 

portions of the blended payment during 

the transition, we believe it is 

appropriate for the numbers associated 

with both components of the calculation 

(the market basket and the productivity 

adjustment) to coincide so that changes 

in market conditions are aligned. 

Therefore, for the CY 2012 update, we 

proposed that the MFP adjustment be 

calculated as the 10-year moving 

average of changes in MFP for the 

period ending December 31, 2012. We 

proposed to round the final annual 

adjustment to the one-tenth of one 

percentage point level up or down as 

applicable according to conventional 

rounding rules (that is, if the number we 

are rounding is followed by 5, 6, 7, 8, 

or 9, we will round the number up; if 

the number we are rounding is followed 

by 1, 2, 3, or 4, we will round the 

number down). 

Thus, in accordance with section 

1881(b)(14)(F)(i) of the Act, the 

proposed market basket increase factor 

for CY 2012 for the ESRDB market 

basket was based on the 1st quarter 2011 

forecast of the CY 2008-based ESRDB 

market basket update, which was 

estimated to be 3.0 percent. This market 

basket percentage was then reduced by 

the MFP adjustment (the 10-year 

moving average of MFP for the period 

ending CY 2012) of 1.2 percent, which 

is calculated as described above and 

based on IGI’s 1st quarter 2011 forecast. 

The resulting proposed MFP-adjusted 

ESRDB market basket update for CY 

2012 was equal to 1.8 percent, or 3.0 

percent less 1.2 percent. We proposed 

that if more recent data were 

subsequently available (for example, a 

more recent estimate of the market 

basket and MFP adjustment), we would 

use such data, if appropriate, to 

determine the CY 2012 market basket 

update and MFP adjustment in the CY 

2012 ESRD PPS final rule. Consistent 

with historical practice and our 

proposal, we update the market basket 

increase factor estimate and the MFP 

adjustment in this final rule to reflect 

the most recent available data (75 FR 

40505). 

We received no public comments 

related to the proposed MFP-adjusted 

ESRDB market basket update for CY 

2012. Therefore, we are finalizing our 

proposal to base the CY 2012 market 

basket update, which is used to 

determine the applicable percentage 

increase for the ESRD PPS and 

transition payments, on the most recent 

data available, which is the third quarter 

2011 forecast of the CY 2008-based 

ESRDB market basket (estimated to be 

3.0 percent). The MFP adjustment (the 

10-year moving average of MFP for the 

period ending CY 2012) we are 

finalizing is 0.9 percent, which was 

calculated as described above and based 

on IGI’s third quarter 2011 forecast. 


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Therefore, the final MFP-adjusted 

ESRDB market basket update for CY 

2012 is 2.1 percent (3.0 percent ESRDB 

market basket less 0.9 percentage point 

MFP adjustment). 

3. Transition Budget-Neutrality 

Adjustment for CY 2011 

Section 1881(b)(14)(E)(iii) of the Act 

requires that an adjustment to payments 

be made for renal dialysis services 

provided by ESRD facilities during the 

transition so that the estimated total 

payments under the ESRD PPS, 

including payments under the 

transition, equal the estimated total 

amount of payments that would 

otherwise occur under the ESRD PPS 

without such a transition. In the CY 

2011 ESRD PPS final rule, we explained 

that because we would not know the 

actual number of ESRD facilities that 

would elect to opt out of the transition 

prior to publishing the final rule, we 

would simulate payments under the 

existing basic case-mix adjusted 

composite payment system and under 

the ESRD PPS to determine how many 

ESRD facilities we believed would elect 

to receive payment under 100 percent 

ESRD PPS. Based on our simulations 

using 2007 data, we estimated that 43 

percent of ESRD facilities would 

financially benefit from receiving full 

payment under the ESRD PPS. We 

indicated that based on the simulation 

of estimated payments, a 3.1 percent 

reduction would be applied to all 

payments made to ESRD facilities for 

renal dialysis services furnished on 

January 1, 2011 through December 31, 

2011 (75 FR 49082 through 49083). 

On April 6, 2011, we published an 

interim final rule with comment period 

in the Federal Register (76 FR 18930), 

entitled ‘‘Changes to the End-Stage 

Renal Disease Prospective Payment 

System Transition Budget-Neutrality 

Adjustment’’, which revised the ESRD 

transition budget-neutrality adjustment 

finalized for CY 2011. In the interim 

final rule, we indicated that based upon 

the election data submitted by ESRD 

facilities, 87 percent of ESRD facilities 

elected to opt out of the transition. 

When we applied the actual number of 

ESRD facilities electing to receive 

payment under the ESRD PPS, the 

transition budget-neutrality adjustment 

was determined to be zero rather than 

a 3.1 reduction in payments. We revised 

the 3.1 percent transition budgetneutrality adjustment reduction to a 

zero percent transition budget-neutrality 

adjustment for renal dialysis services 

furnished on April 1, 2011 through 

December 31, 2011. We also indicated 

that we would respond to comments 

submitted on the interim final rule in 

the CY 2012 ESRD PPS final rule. 

We received four comments during 

the IFC comment period and three 

comments in response to the CY 2012 

ESRD PPS proposed rule. All comments 

were in support of the revised CY 2011 

transition budget-neutrality adjustment 

factor. Therefore, we are finalizing the 

revised CY 2011 transition budgetneutrality adjustment factor of zero for 

ESRD claims for renal dialysis services 

furnished on April 1, 2011 through 

December 31, 2011. 

4. Transition Budget-Neutrality 

Adjustment for CY 2012 

Section 1881(b)(14)(E)(i) of the Act 

requires the Secretary to provide a fouryear phase-in of the payments under the 

ESRD PPS for renal dialysis services 

furnished on or after January 1, 2011, 

with payments under the ESRD PPS 

fully implemented for renal dialysis 

services furnished on or after January 1, 

2014. We use the term ‘‘transition’’ 

rather than ‘‘phase-in’’ to be consistent 

with other Medicare payment systems. 

Section 1881(b)(14)(E)(ii) of the Act 

permitted ESRD facilities to make a onetime election to be excluded from the 

transition. An ESRD facility that elected 

to be excluded from the transition 

would receive payment for renal 

dialysis services provided on or after 

January 1, 2011, based on 100 percent 

of the payment rate under the ESRD PPS 

rather than a blended payment based in 

part on the payment rate under the basic 

case-mix adjusted composite payment 

system and in part on the payment rate 

under the ESRD PPS. Section 

1881(b)(14)(E)(iii) of the Act also 

requires that we make an adjustment to 

payments during the transition so that 

the estimated total amount of payments 

under the ESRD PPS, including 

payments under the transition, equals 

the estimated total amount of payments 

that would otherwise occur under the 

ESRD PPS without such a transition. We 

refer to this provision as the transition 

budget-neutrality adjustment. 

As described in the CY 2011 ESRD 

PPS final rule (75 FR 49082), the 

transition budget-neutrality adjustment 

is comprised of two parts. For the first 

part, we created a payment adjustment 

to the composite rate portion of the 

blended payment during the transition 

to account for the per treatment costs of 

drugs that were paid under Part D. For 

the second part, we computed a factor 

that would make the estimated total 

amount of payments under the ESRD 

PPS, including payments under the 

transition, equal to the estimated total 

amount of payments that would 

otherwise occur without such a 

transition. In the proposed rule, we 

addressed both parts of the transition 

budget-neutrality adjustment (76 FR 

40505 and 40506). The first part of the 

transition budget-neutrality adjustment 

was addressed in section I.C.1. of this 

final rule where we address updates to 

the composite rate and the ESRD PPS 

base rate. 

For the second part of the transition 

budget-neutrality factor, we first 

determined the estimated increase in 

payments under the transition and then 

determined an offset factor, based on 

estimates of which facilities would 

choose to opt out of the transition (for 

a detailed description, see the CY 2011 

ESRD PPS proposed rule, 74 FR 49946). 

We estimated the number of facilities 

that would choose to opt out of the 

transition by comparing payment under 

the transition to payment under the PPS 

and choosing the option that was 

financially beneficial to each facility. 

Using that approach, we estimated that 

43 percent of facilities would choose to 

opt out of the transition and determined 

the transition budget-neutrality 

adjustment to be a reduction of 3.1 

percent. In the April 6, 2011 interim 

final rule with comment (76 FR 18930 

through 18934), however, we updated 

the number of facilities that chose to opt 

out of the transition to 87 percent, based 

on actual election data that we received 

and recalculated a transition budgetneutrality adjustment of zero percent. 

Given that the transition budgetneutrality adjustment required under 

section 1881(b)(14)(A)(ii) of the Act 

applies in each year of the transition, we 

must update the transition budgetneutrality adjustment for CY 2012. In 

the proposed rule (76 FR 40506), we 

noted that we were not proposing for CY 

2012 to change the methodology used to 

calculate the second part of the budgetneutrality adjustment. However, we 

proposed to use more updated data. In 

order to ensure that total payments 

under the transition equal total payment 

amounts without a transition, we would 

reduce all payments to ESRD facilities 

in CY 2012 by a factor that is equal to 

1 minus the ratio of estimated payments 

under the ESRD PPS if there were no 

transition to the total estimated 

payments under the transition. 

In the proposed rule, we explained 

that we started with 2009 utilization 

data from claims, as 2009 was the latest 

complete year of claims data available of 

complete claims data. In this final rule, 

we used 2010 claims as it is the latest 

available year. Using price growth 

factors for CY 2011 and CY 2012 that are 

discussed in the impact analysis in 

section I.VII.B.1 of this final rule, we 

updated the CY 2010 utilization data to 


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CY 2011 and CY 2012 payments. We 

then took the estimated CY 2012 

payments under the full ESRD PPS and 

the blended payments under the 

transition based on actual facility 

election data and compared these 

estimated payments to the total 

estimated payments in CY 2012 as if all 

facilities had elected to receive payment 

under the full ESRD PPS. We then 

calculated the transition budgetneutrality factor to be 1 minus the ratio 

of estimated payments under the ESRD 

PPS if there were no transition to the 

total estimated payments under the 

transition, which results in zero percent. 

Therefore, for CY 2012, we proposed 

that a zero percent reduction to all 

payments would be made to ESRD 

facilities (that is, the zero percent 

adjustment would be applied to both the 

blended payments under the transition 

and payments made under the 100 

percent ESRD PPS). We solicited 

comments on the proposed second part 

of CY 2012 transition budget-neutrality 

adjustment methodology. The 

comments and our responses are set 

forth below. 

Comment: Several national 

associations and one dialysis 

organization supported the zero percent 

transition budget-neutrality adjustment 

for CY 2012. One commenter indicated 

that the proposed rule appropriately 

reflected that a greater percentage of 

ESRD facilities than estimated elected to 

receive payment under the ESRD PPS. 

Response: We thank the commenters 

for their support. Therefore, in this final 

rule, we are finalizing the proposed 

second part of the transition budgetneutrality adjustment and the zero 

percent budget-neutrality adjustment for 

CY 2012. 

5. Low-Volume Facility Provisions 

Section 1881(b)(14)(D)(iii) of the Act 

requires a low-volume payment 

adjustment that ‘‘reflects the extent to 

which costs incurred by low-volume 

facilities (as defined by the Secretary) in 

furnishing renal dialysis services exceed 

the costs incurred by other facilities in 

furnishing such services, and for 

payment for renal dialysis services 

furnished on or after January 1, 2011, 

and before January 1, 2014, such 

payment adjustment shall not be less 

than 10 percent’’. We established the 

low-volume payment adjustment, 

including the methodology we used to 

develop the low-volume treatment 

threshold in the CY 2011 ESRD PPS 

final rule (75 FR 49117 through 49125). 

Because the analysis included data that 

spanned a 3-year period, we defined a 

low-volume ESRD facility as a facility 

that is able to maintain its low-volume 

status each year of the 3-year period. 

This timeframe provided us with a 

sufficient span of time to view 

consistency in business operations 

through the data. Under 42 CFR 

413.232(b), a low-volume facility is an 

ESRD facility that: (1) Furnished less 

than 4,000 dialysis treatments in each of 

the 3 years preceding the payment year 

and (2) has not opened, closed, or 

received a new provider number due to 

a change in ownership during the 3 

years preceding the payment year. 

Under § 413.232(c), the number of 

treatments shall be equal to the 

aggregate number of treatments 

furnished by other ESRD facilities that 

are both under common ownership and 

25 road miles or less from the ESRD 

facility in question. This geographic 

proximity criterion is only applicable to 

ESRD facilities that are Medicare 

certified on or after January 1, 2011. 

Section 413.232(f) requires an ESRD 

facility to provide an attestation 

statement to their respective fiscal 

intermediary or Medicare administrative 

contractor (FI/MAC) that the facility 

meets all the criteria in order to receive 

the low-volume adjustment. We note 

that furnishing 4,000 treatments in a 

year equates to approximately 25 

patients per year receiving three dialysis 

treatments a week (or hemo-equivalent 

treatments). 

In the proposed rule, we discussed 

§ 413.232 and clarified that the 

‘‘payment year’’ is the period of time 

that we use for determining payment to 

ESRD facilities, which is a calendar 

year, and that eligibility years mean the 

3 years preceding the payment year and 

are based on cost reporting years (76 FR 

40506). We made this clarification to 

ensure that ESRD facilities and their 

respective FI/MACs understand the 

distinction between eligibility (which is 

based on cost reporting years) and the 

payment year (when ESRD facilities can 

begin to receive the low-volume 

payment adjustment). 

We did not seek comments on the 

clarifications of the payment and cost 

report years, however, we received three 

comments indicating the clarifications 

were helpful. 

In the proposed rule (76 FR 40506 and 

40507), we proposed to establish the 

process for CY 2012 and each year 

thereafter, that an ESRD facility would 

be required to follow when submitting 

its attestation to notify its FI/MAC that 

it is eligible for the low-volume 

payment adjustment. We further 

explained that the attestation is required 

because: (1) ESRD facility’s cost 

reporting periods vary and may not be 

based on the calendar year; and (2) the 

cost reports are due 5 months after the 

close of the cost reporting period (that 

is, there is a lag in the cost reporting 

submission). Thus, the FI/MACS may 

not have the cost report for the third 

year to determine eligibility and would 

need to rely on the attestation for that 

year. We proposed that if an ESRD 

facility believes that it is eligible for the 

low-volume adjustment, the ESRD 

facility would be required to submit an 

attestation to its respective FI/MAC no 

later than November 1st of each year, 

and proposed to amend the regulation 

text at § 413.232(f) (76 FR 40507). We 

noted that this timeframe provides 60 

days for a FI/MAC to verify the cost 

report information and update the 

systems (76 FR 40507). We explained 

that if ESRD facilities are receiving the 

low-volume adjustment for the CY 2011 

payment year, those ESRD facilities 

should submit another attestation to 

their respective FI/MAC no later than 

November 1, 2011, to qualify for the 

low-volume adjustment for the CY 2012 

payment year. An ESRD facility must 

continue to attest that it is a low-volume 

facility for each subsequent payment 

year it believes it is eligible for the lowvolume facility adjustment. 

We explained that if the FI/MAC does 

not receive an ESRD facility’s attestation 

stating that the ESRD facility is eligible 

for the low-volume adjustment on or 

before November 1 prior to the payment 

year, the ESRD facility would not 

receive the low-volume adjustment for 

that payment year. We also noted that 

in the event a dialysis organization 

submits the low-volume attestation on 

behalf of its ESRD facilities, the dialysis 

organization will be required to identify 

each ESRD facility by name and 

provider number and submit them by 

the November 1 deadline. 

We solicited comment on our 

proposal and the proposed regulation 

text changes at § 413.232(f). 

We did not receive any comments 

and, therefore, in this final rule, we are 

finalizing a yearly November 1 deadline 

for attestation submission and we are 

revising the regulation at § 413.232(f) to 

reflect this date for CY 2012 and each 

year thereafter. However, because the 

CY 2012 final rule will not be effective 

before November 1, 2011, we are 

finalizing a later low-volume attestation 

submission deadline of January 3, 2012, 

for attestations that pertain to the CY 

2012 low-volume adjustment. We 

believe this due date provides facilities 

sufficient time to submit an attestation 

and allows the agency (that is, the FI/ 

MACs) time to process submissions. In 

addition, a later date is not possible 

since the CY 2012 payment year will be 

underway. Accordingly, we also are 


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revising the regulation at § 413.232(f) to 

reflect this change. 

In the proposed rule, we indicated 

that the ESRD facility’s cost reports for 

the cost reporting periods ending in the 

3 years immediately preceding the 

payment year must report costs for 12- 

consecutive months (76 FR 40507). For 

example, an FI/MAC should not 

consider a short period cost report (that 

is, reporting costs for less than 12 

months which may occur for new 

facilities or facilities under new 

ownership), for low-volume eligibility. 

Specifically, when an ESRD facility is 

assessing its eligibility for the lowvolume adjustment and preparing its 

attestation, the ESRD facility should 

look at its 12-consecutive month cost 

reports for the cost reporting periods 

that end in the 3 years immediately 

preceding the payment year. 

As we indicated previously, the FI/ 

MAC may not have a final-settled cost 

report for all 3 years needed to complete 

the ESRD facility’s verification and we 

provided examples of such situations 

(76 FR 40507). Therefore, we proposed 

to amend the regulations at 

§ 413.232(b)(1) and (b)(2) to clarify the 

meaning of year with regard to the 

treatment threshold that is used for 

determining low-volume eligibility and 

how it relates to the payment year. This 

proposed change to the regulations 

would make clear that the ESRD 

facility’s cost reports for the 3 years 

immediately preceding the payment 

year must report costs for 12- 

consecutive months, and provide 

clarification that in the absence of an 

ESRD facility’s final settled cost report, 

an FI/MAC can review the ESRD 

facility’s as-filed cost report when 

determining if an ESRD facility meets 

the low-volume criteria. We believe that 

it is appropriate for the FI/MAC to 

determine eligibility based upon an asfiled cost report because the number of 

total treatments should not change 

between submission of the as-filed cost 

report and the final settled cost report. 

We solicited comment on the proposed 

changes at § 413.232(b)(1) and (b)(2). We 

did not receive any comments and, 

therefore, we are finalizing these 

proposed changes to the regulation at 

§ 413.232(b)(1) and (b)(2). 

In the proposed rule, we explained 

that if an FI/MAC receives an ESRD 

facility’s attestation stating that the 

ESRD facility believes that it qualifies 

for the low-volume payment adjustment 

and then finds that the ESRD facility did 

not meet the low-volume criteria, the FI/ 

MAC will discontinue application of the 

low-volume adjustment (76 FR 40508). 

If the ESRD facility does not remain 

low-volume for each of the 3 years (12- 

consecutive month cost reporting 

periods) immediately preceding the 

payment year, the ESRD facility is not 

eligible for the low-volume adjustment 

until it can demonstrate again that for 3 

years (12-consecutive month cost 

reporting periods) it has met the lowvolume criteria. The comments we 

received and our responses are set forth 

below. 

Comment: One independent ESRD 

facility asked if an ESRD facility was 

determined not to qualify for the lowvolume adjustment, would the lowvolume adjustment be discontinued 

without payment implication. 

Response: Medicare is obligated to 

provide appropriate payment. If an 

ESRD facility has not met the eligibility 

requirements as described in 42 CFR 

413.232, the ESRD facility would not be 

entitled to receive the low-volume 

adjustment and the inappropriate lowvolume payments made in that payment 

year would be recouped. 

Comment: One commenter indicated 

that in the CY 2011 ESRD PPS final rule, 

we defined a low-volume facility at 

§ 413.232(b)(2) as an ESRD facility that 

has not opened, closed, or received a 

new provider number due to a change 

in ownership during the 3 years 

preceding the payment year (75 FR 

49118). The commenter pointed out that 

in the CY 2011 ESRD PPS final rule we 

did not finalize the phrase, ‘‘or received 

a new provider number due to a change 

in ownership’’ in the regulation text at 

§ 413.232(b)(2) and in our discussion of 

the definition of a low-volume facility 

in this year’s proposed rule we only 

referred to the phrase, ‘‘or had a change 

in ownership’’ (76 FR 40507). The 

commenter is concerned that if we do 

not include the phrase, ‘‘or received a 

new provider number due to a change 

in ownership’’ in the regulation text at 

§ 412.232(b)(2) that it will negatively 

impact new owners of underperforming 

clinics that would otherwise wish to 

apply for the low-volume designation. 

Response: We agree with the 

commenter that in the CY 2011 final 

rule we inadvertently omitted the 

phrase, ‘‘or received a new provider 

number due to a change in ownership’’ 

in the regulation text finalized at 

§ 413.232(b)(2). In the preamble of both 

the CY 2011 ESRD PPS proposed and 

final rules (74 FR 49118 through 49919, 

74 FR 49975), we made clear that under 

§ 413.232(b), a low-volume facility is 

defined as an ESRD facility that ‘‘has 

not opened, closed, or received a new 

provider number due to a change of 

ownership * * *’’; however, we 

inadvertently omitted language from the 

regulation (74 FR 50024, 74 FR 49200). 

Therefore, in this final rule, we are 

making a technical correction to the 

regulation text at § 413.232(b)(2) to 

reflect that a low-volume facility is an 

ESRD facility that has not open, closed, 

or received a new provider number due 

to a change in ownership in the 3 years 

preceding the payment year. 

Comment: One independent ESRD 

facility questioned the policy that ESRD 

facilities must remain low volume (that 

is, provide less than 4,000 dialysis 

treatments) for three years immediately 

preceding the payment year or risk not 

qualifying for the low-volume 

adjustment until it can once again 

demonstrate it is low volume for three 

consecutive years. The commenter 

further stated that many small or rural 

dialysis facilities provide the only 

access to care in a geographic area and 

this policy requires the established lowvolume facility to choose between 

providing access to care and significant, 

long term payment reductions. The 

commenter further stated that this 

policy could result in dialysis facilities 

denying care to avoid crossing the 4,000 

threshold. The commenter suggested 

that CMS consider reducing the 

eligibility timeline for small facilities 

that have met the low-volume eligibility 

criteria so that they could re-qualify for 

the low-volume adjustment in the 

following year if their treatments 

returned to less than 4,000 per year. 

Response: We do not agree with the 

commenter’s assertion of the negative 

effects of the low-volume eligibility 

criteria. The low-volume adjustment is 

intended for ESRD facilities that are 

located in areas that have a population 

base resulting in less than 4,000 

treatments per year and is not intended 

to account for fluctuations or business 

decisions that increase or decrease the 

number of treatments that can or would 

be provided. We do not believe that 

these fluctuations or changes in the 

population from year to year would in 

most circumstances result in a facility 

not being eligible for the low-volume 

adjustment. As we indicated in the CY 

2011 ESRD PPS final rule (75 FR 49118 

and 49119), we believe the low-volume 

adjustment should encourage small 

ESRD facilities to continue to provide 

access to care, but are concerned about 

potential disincentives that low-volume 

facilities could have regarding patient 

care. We are monitoring the number of 

facilities that are receiving the lowvolume adjustment. Any changes in the 

low-volume methodology will be 

discussed in future rulemaking. 

As for allowing facilities that lose 

low-volume status to requalify for lowvolume status the next year, any 

changes in the low-volume eligibility 


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criteria would be addressed in future 

rulemaking. 

6. Update to the Drug Add-On to the 

Composite Rate Portion of the ESRD 

Blended Payment Rate 

Section 1881(b)(14)(E)(i) of the Act 

requires a four-year transition under the 

ESRD PPS. Under § 413.239, ESRD 

facilities were permitted to make a onetime election by November 1, 2011, to 

be excluded from the transition and 

receive full payment under the ESRD 

PPS. Under § 413.239, in CY 2012, 

ESRD facilities that elected to receive 

payment under the transition will be 

paid a blended amount that will consist 

of 50 percent of the basic case-mix 

adjusted composite payment system and 

50 percent on the ESRD PPS payment. 

Thus, we must continue to update the 

composite rate portion of the blended 

payment amount during the ESRD PPS 

4-year transition (CYs 2011 through 

2013), which includes an update to the 

drug add-on. 

Under section 1881(b)(12) of the Act, 

the basic case-mix adjusted composite 

payment system includes the services 

comprising the composite rate and an 

add-on to the composite rate component 

to account for the difference between 

pre-MMA payments for separately billed 

drugs and the revised drug pricing 

specified in the statute. For the drug 

add-on for CY 2012 (76 FR 40508 and 

40509), we did not propose any changes 

to the methodology, but merely updated 

the data used in computing the drug 

add-on as described below. 

a. Estimating Growth in Expenditures 

for Drugs and Biologicals in CY 2012 

Section 1881(b)(12)(F) of the Act 

specifies that the drug add-on increase 

must reflect ‘‘the estimated growth in 

expenditures for drugs and biologicals 

(including erythropoietin) that are 

separately billable * * *’’. By referring 

to ‘‘expenditures’’, we believe the 

statute contemplates that the update 

would account for both increases in 

drug prices, as well as increases in 

utilization of those drugs. 

To account for increases in drug 

prices and utilization, we used the 5 

years of drug expenditure data based on 

ASP pricing and proposed to use this 

data for trend analysis (76 FR 40508). 

We then removed growth in enrollment 

for the same time period from the 

expenditure growth so that the residual 

reflects the per patient expenditure 

growth (which includes price and 

utilization combined). 

To estimate drug expenditure growth 

using trend analysis for CY 2012, we 

looked at the average annual growth in 

total drug expenditures between 2006 

and 2010. First, we estimated the total 

drug expenditures for all ESRD facilities 

in CY 2010. We used the final CY 2006 

through CY 2009 ESRD claims data and 

the latest available CY 2010 ESRD 

facility claims, updated through 

December 31, 2010 (that is, claims with 

dates of service from January 1 through 

December 31, 2010, that were received, 

processed, paid, and passed to the 

National Claims History File as of 

December 31, 2010). We indicated that 

for this final rule, we intended to use 

additional updated CY 2010 claims with 

dates of service for the same timeframe 

(76 FR 40508). This updated CY 2010 

data file would include claims received, 

processed, paid, and passed to the 

National Claims History File as of June 

30, 2011. 

We inflated the CY 2010 drug 

expenditures to estimate the June 30, 

2011 update of the 2010 claims file. The 

net adjustment to the CY 2010 claims 

data was an increase of 11.62 percent to 

the 2010 expenditure data, which 

allowed us to more accurately compare 

the 2009 and 2010 drug expenditure 

data to estimate per patient growth. 

Next, we calculated the average annual 

change in drug expenditures from 2006 

through 2010. This average annual 

change showed an increase of 1.4 

percent in drug expenditures from 2006 

through 2010 (76 FR 40508). We used 

this 1.4 percent increase to project drug 

expenditures for both 2011 and 2012. 

For the final rule, using the full-year 

2010 drug expenditure figure, we 

calculated the average annual change in 

drug expenditure from 2006 through 

2010. This average annual change 

showed an increase of 1.0 percent in 

drug expenditures from 2006 through 

2010. We used this 1.0 percent increase 

to project drug expenditures for both 

2011 and 2012. We note, the change in 

the drug expenditures increase is a 

result of updated data. 

b. Estimating per Patient Growth 

In the proposed rule, we explained 

that once we had the projected growth 

in drug expenditures from 2011 to 2012, 

we calculated per patient growth 

between CYs 2011 and 2012 by 

removing the estimated growth in 

enrollment data between CY 2011 and 

CY 2012 (76 FR 40508). We estimate a 

4.2 percent estimated growth in 

enrollment between CY 2011 and CY 

2012. To obtain the per-patient 

estimated growth in expenditures, we 

divided the total drug expenditure 

change between 2011 and 2012 (1.014) 

by enrollment growth of 4.2 percent 

(1.042) for the same timeframe. The 

result was a per-patient growth factor 

equal to 0.973 (1.014/1.042 = 0.973). 

Thus, we projected a 2.7 percent 

decrease (2.7 percent = .027 = 0.973¥1) 

in per patient growth in drug 

expenditures between 2011 and 2012. 

For this final rule, we estimate a 4.3 

percent estimated growth in enrollment 

between CY 2011 and CY 2012. To 

obtain the per-patient estimated growth 

in expenditures, we divided the total 

drug expenditure change between 2011 

and 2012 (1.010) by enrollment growth 

of 4.3 percent (1.043) for the same 

timeframe. The result is a per-patient 

growth factor equal to 0.968 (1.010/ 

1.043 = 0.968). Thus, in this final rule, 

for CY 2012 we are projecting a 3.2 

percent decrease (¥3.2 percent = 1.010/ 

1.043¥1 = 0.968¥1) in per patient 

growth in drug expenditures between 

2011 and 2012. 

c. Applying the Growth Update to the 

Drug Add-On Adjustment 

In the CY 2006 PFS final rule (71 FR 

69683), we applied the projected growth 

update percentage to the total amount of 

drug add-on dollars established for CY 

2005 to establish a dollar amount for the 

CY 2006 growth update. In addition, we 

projected the growth in dialysis 

treatments for CY 2006 based on the 

projected growth in ESRD enrollment. 

We divided the projected total dollar 

amount of the CY 2006 growth by the 

projected growth in total dialysis 

treatments to develop the per treatment 

growth update amount. This growth 

update amount, combined with the CY 

2005 per treatment drug add-on amount, 

resulted in an average drug add-on 

amount per treatment of $18.88 (or a 

14.5 percent adjustment to the 

composite rate) for CY 2006. 

In the CY 2007 PFS final rule with 

comment period (71 FR 69684), as a 

result of public comments, we revised 

our update methodology by applying 

the growth update to the per treatment 

drug add-on amount. That is, for CY 

2007, we applied the growth update 

factor of 4.03 percent to the $18.88 per 

treatment drug add-on amount resulting 

in an updated per treatment drug addon amount of $19.64 per treatment (71 

FR 69684). For CY 2008, the per 

treatment drug add-on amount was 

updated to $20.33. In the CY 2009, 2010 

and 2011 PFS final rule with comment 

period (73 FR 69755 through 69757, 74 

FR 61923, and 75 FR 73485, 

respectively), we applied a zero update 

to the per treatment drug add-on 

amount resulting in a per treatment drug 

add-on amount of $20.33. As discussed 

in detail below, in this final rule, for CY 

2012, we are finalizing a zero update to 

the per treatment drug add-on amount 

of $20.33 established in CY 2008. 


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d. Update to the Drug Add-On 

Adjustment for CY 2012 

We estimated a 1.4 percent increase in 

drug expenditures between CY 2011 and 

CY 2012 (76 FR 40509). Combining this 

increase with a 4.2 percent increase in 

enrollment, as described above, we 

projected a 2.7 percent decrease in per 

patient growth of drug expenditures 

between CY 2011 and CY 2012. 

Therefore, we projected that the 

combined growth in per patient 

utilization and pricing for CY 2012 

would result in a decrease to the drug 

add-on equal to 0.4 percentage points. 

This figure was derived by applying the 

2.7 percent decrease to the CY 2011 

drug add-on of $20.33. This resulted in 

a revised drug add-on of $19.78, which 

is 14.0 percent of the proposed CY 2012 

base composite rate of $141.52. If we 

were to apply no decrease to the drug 

add-on of $20.33, this would result in a 

14.4 percent drug add-on. However, 

similar to last year and as indicated 

above, we proposed a zero update to the 

drug add-on adjustment. We explained 

in the proposed rule that we believed 

this approach is consistent with the 

language under section 1881(b)(12)(F) of 

the Act, which states in part that ‘‘the 

Secretary shall annually increase’’ the 

drug add-on amount based on the 

growth in expenditures for separately 

billed ESRD drugs. Our understanding 

of the statute contemplates ‘‘annually 

increase’’ to mean a positive or zero 

update to the drug add-on. Therefore, 

we proposed to apply a zero update and 

maintain the $20.33 per treatment drug 

add-on amount for CY 2012. The 

comments and our responses are set 

forth below. 

Comment: Two commenters 

supported our proposed zero drug-add. 

Response: We thank the commenters 

for their support. 

Comment: One commenter indicated 

that ESA usage is overstated in 2006 

through 2010 and that this would have 

an effect on the drug add-on and the 

ESRD PPS base rate calculations. The 

commenter recommended that we 

develop an ESA adjuster for the ESRD 

PPS base rate. 

Response: We used the best available 

data to compute the drug add-on and 

the base rate. We continue to believe 

that the information on ESRD claims 

represent the best information currently 

available to the agency. Because we are 

required under section 

1881(b)(14)(A)(ii) of the Act to use the 

lowest utilization year (which we 

determined to be 2007), we did not have 

discretion on the data we used in 

calculating the ESRD PPS base rate. We 

note that it is common for utilization of 

services to change after implementation 

of a PPS. That is why we periodically 

review our payment systems to 

determine if a refinement is warranted. 

In addition, if we were to adjust for ESA 

over usage in computing the drug addon, this would lower the trend and the 

drug add-on would become more 

negative. As we discussed above, 

section 1881(b)(12)(F) of the Act, 

precludes a reduction of the drug addon because the statute requires that we 

annually increase the drug add-on. 

In this final rule, for CY 2012, we 

estimate a 1.0 percent increase in drug 

expenditures between CY 2011 and CY 

2012. Combining this increase with a 

4.3 percent increase in enrollment, we 

project a 3.2 percent decrease in per 

patient growth of drug expenditures 

between CY 2011 and CY 2012. 

Therefore, we project that the combined 

growth in per patient utilization and 

pricing for CY 2012 would result in a 

decrease to the drug add-on equal to 0.4 

percentage points. This figure is derived 

by applying the 3.2 percent decrease to 

the CY 2011 drug add-on of $20.33. This 

results in a revised drug add-on of 

$19.69, which is 13.9 percent of the 

final CY 2012 base composite rate of 

$141.94. If we were to apply no decrease 

to the drug add-on of $20.33, this would 

result in a 14.3 percent drug add-on. 

Similar to last year and as discussed 

above, for CY 2012, we are finalizing a 

zero update to the drug add-on and 

maintaining the $20.33 per treatment 

drug add-on amount. 

The current $20.33 per treatment drug 

add-on reflected a 14.7 percent drug 

add-on adjustment to the composite rate 

in effect for CY 2011. Using the latest 

ESRDB market basket minus 

productivity adjustment to update the 

composite rate portion of the ESRD PPS 

payment (forecast of 2.1 percent in 2012 

effective January 1, 2012, as discussed 

in section I.B.2.b. of this final rule), 

results in a decrease to the CY 2012 

drug add-on adjustment from 14.7 to 

14.3 percent in order to maintain the 

drug add-on at $20.33. This decrease 

occurs because the drug add-on 

adjustment is a percentage of the 

composite rate. Since the final CY 2012 

composite rate is higher than the CY 

2011 composite rate, and since the drug 

add-on remains at $20.33, the 

percentage decreases. Therefore, we are 

finalizing for CY 2012 the drug add-on 

adjustment of 14.3 percent to the 

composite rate. 

7. Updates to the Wage Index Values 

and Wage Index Floor for the Composite 

Rate Portion of the Blended Payment 

and the ESRD PPS Payment 

Section 1881(b)(14)(D)(iv)(II) of the 

Act provides that the ESRD PPS may 

include such other payment 

adjustments as the Secretary determines 

appropriate, such as a payment 

adjustment by a geographic wage index, 

such as the index referred to in section 

1881(b)(12)(D) of the Act. In the CY 

2011 ESRD PPS final rule (75 FR 49117 

through 49117) and CY 2011 PFS final 

rule (75 FR 73486), we finalized the 

wage index policy under the ESRD PPS. 

Specifically, under the ESRD PPS, we 

have adopted the same method and 

source of wage index values used 

previously for the basic case-mix 

adjusted composite payment system. 

We use the Office of Management and 

Budget’s (OMB’s) Core Based Statistical 

Area (CBSA)-based geographic area 

designations to define urban and rural 

areas and corresponding wage index 

values (76 FR 40509). In addition, the 

wage index values used under the ESRD 

PPS are the inpatient prospective 

payment system (IPPS) wage index 

values calculated without regard to 

geographic reclassifications authorized 

under sections 1881(d)(8) and (d)(10) of 

the Act, and utilize pre-floor hospital 

data that are unadjusted for 

occupational case mix. The CBSA-based 

geographic area designations are 

described in OMB Bulletin 03–04, 

originally issued June 6, 2003, and are 

available online at http:// 

www.whitehouse.gov/omb/bulletins/ 

b03–04.html. In addition, OMB has 

published subsequent bulletins 

regarding CBSA changes, including 

changes in CBSA numbers and titles. 

All ESRD rules and notices are 

considered to incorporate the CBSA 

changes published in the most recent 

OMB bulletin that applies to the 

hospital wage index used to determine 

the current ESRD wage index. The OMB 

bulletins may be accessed online at 

http://www.whitehouse.gov/omb/ 

bulletins/index.html. 

Under the ESRD PPS, we adopted a 

wage index floor during the transition, 

though we intended to gradually reduce 

the ESRD wage index floor (76 FR 

40509, 75 FR 49117, 75 FR 73486). In 

the proposed rule (76 FR 40502–40503), 

we did not propose any changes to the 

labor-related share for the ESRD PPS 

and the composite rate portion of the 

blend and proposed to continue to use 

a labor-related share of 41.737 percent 

for CY 2012 for the ESRD PPS. If an 

ESRD facility elected to transition to the 

PPS, the labor-related share for the 


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composite rate portion of the blended 

payment is 53.711 percent. We 

proposed to continue to use the laborrelated share of 53.711 percent for the 

composite rate portion of the blended 

payment for all the years of the 

transition. As discussed in section I.2.b 

of this final rule, we finalized the 

proposed labor-related share for the 

ESRD PPS and the composite rate 

portion of the blended payment. Finally, 

the wage data used to construct the 

wage index under the ESRD PPS is 

updated annually, based on the most 

current data available and based on 

OMB’s definitions and corresponding 

wage index values. 

As we previously indicated, because 

ESRD facilities could elect to receive a 

blended payment during the transition, 

we continue to update the composite 

rate portion of the ESRD PPS blended 

payment, including adjusting payments 

for geographic differences in area wage 

levels (76 FR 40509, 75 FR 40163). We 

did not propose any changes to the 

methodology for the wage index used to 

adjust the composite rate portion of the 

ESRD PPS blended payment. However, 

we did propose to update the wage 

index values and the wage index 

budget-neutrality adjustment factor for 

CY 2012. We did not receive any 

comments pertaining to our proposal to 

update the wage index values and the 

wage index budget-neutrality 

adjustment factor for CY 2012 for the 

composite rate portion of the blended 

payment under the transition. 

Consequently, we are finalizing our 

proposal. 

Although we did not propose to make 

any changes to the methodology for 

updating the CY 2012 wage index under 

the ESRD PPS (that is, for full ESRD PPS 

payments and the ESRD PPS portion of 

the blended payment under the 

transition), we did propose a wage 

index budget-neutrality adjustment 

factor to be applied in CY 2012 and in 

subsequent years for the ESRD PPS (76 

FR 40509). 

We received one comment as set forth 

below. 

Comment: One independent ESRD 

facility indicated that it based its 

decision to receive payment under the 

transition because the CY 2011 

composite rate wage index value for the 

facility’s area was higher than the wage 

index value for the ESRD PPS. The 

commenter stated that the higher 

composite rate wage index would be 

beneficial to those facilities that opted 

to receive payment under the transition. 

The commenter indicated that the 

variances between the CY 2012 

proposed composite rate and ESRD PPS 

wage index values are not as great as 

compared to the CY 2011 variance, 

which was not anticipated by the 

commenter at the time the election was 

made to transition into the ESRD PPS 

and stated that this is not beneficial for 

those dialysis facilities transitioning to 

the ESRD PPS. 

Response: The commenter is correct 

that the differences in the CY 2012 

composite rate and ESRD PPS wage 

index values in the proposed rule are 

not as significant as they were in the CY 

2011 ESRD PPS final rule. The principle 

reason for the differences in the 

composite rate and ESRD PPS wage 

index values in the CY 2011 final rule 

is that the wage index budget neutrality 

adjustment was applied to the 

composite rate values, while budget 

neutrality for the ESRD PPS was 

achieved through the overall 98 percent 

budget-neutrality requirement (76 FR 

40510). The reason the variances 

between the CY 2012 proposed 

composite rate and ESRD PPS wage 

index values are less pronounced is 

because the proposed wage index 

budget-neutrality adjustment for CY 

2012 for the composite rate portion of 

the blended payment is lower than the 

budget-neutrality adjustment factor for 

CY 2011. As we discussed above, in 

detail and in section I.C.1 of this final 

rule, the wage index budget-neutrality 

adjustment for the ESRD PPS and the 

ESRD PPS portion of the blended 

payment is not applied to the wage 

index values, but rather to the ESRD 

PPS base rate. Therefore, the variance 

described by the commenter is related 

solely to the wage index budgetneutrality adjustment for the composite 

rate portion of the blended payment. A 

comparison to the ESRD PPS wage 

index value is not appropriate because 

the composite rate wage index has a 

wage index budget-neutrality 

adjustment applied while the ESRD PPS 

wage index does not. 

Since we did not receive any 

comments pertaining to our proposals 

regarding the method of applying the 

wage index budget-neutrality 

adjustment, that is, applying the wage 

index budget-neutrality adjustment to 

the wage index values for the composite 

rate portion of the blended payment and 

applying the wage index budgetneutrality adjustment to the ESRD PPS 

base rate for the PPS portion of the 

blended payment and the ESRD PPS 

payment, and for the reasons we 

discussed previously, we are finalizing 

those policies. 

a. Reduction to the ESRD Wage Index 

Floor 

The wage index floor for CY 2011 is 

0.600 (75 FR 49116 and 49117 and 75 

FR 73487). For CY 2012 and CY 2013, 

we proposed to continue to reduce the 

wage index floor by 0.05 for each of the 

remaining years of the transition (that is, 

for CY 2012, the wage index value 

would be reduced from 0.600 to 0.550, 

and further reduced to 0.500 for CY 

2013) (76 FR 40510). The ESRD wage 

index floor value of 0.550 would be 

applied to areas with wage index values 

that are below the proposed wage index 

floor. Beginning January 1, 2014, we 

proposed that the wage index floor 

would no longer be applied because the 

wage index floor would be lower than 

areas with low wage index values. In the 

CY 2012 ESRD PPS proposed rule, we 

stated that we continue to believe that 

a gradual reduction in the floor is 

needed to support continuing patient 

access to dialysis in areas that have low 

wage index values, especially in areas 

where the wage index values are below 

the current wage index floor— 

specifically, ESRD facilities located in 

Puerto Rico (76 FR 40510). We solicited 

comments on the proposal to continue 

to gradually reduce the wage index floor 

in CYs 2012 and 2013 and, the 

elimination of the floor in CY 2014. The 

comments we received and our 

responses are set forth below. 

Comment: Three commenters 

responded regarding our proposal to 

reduce and eventually eliminate the 

wage index floor. One commenter 

requested that the wage index floor be 

maintained for rural dialysis facilities 

due to their higher staffing costs, which 

could aggravate disparities in care and 

might impair access to care in rural 

areas. One independent ESRD facility 

indicated that the reduction of the wage 

index floor threatens facilities with low 

wage index values and may result in 

access to care problems. One ESRD 

organization requested that we 

reconsider establishing a wage index 

floor after the transition because the 

commenter believes that eliminating the 

floor would be detrimental to small 

dialysis organizations (SDOs). The 

commenter also stated that some small 

facilities are located in a single 

community and, as such, are not able to 

spread their operating costs as larger 

organizations. The commenter further 

stated that these facilities are in parts of 

the country where the wage index is 

lowest, and the absence of a floor 

threatens their survival and negatively 

impacts access to care. 

Response: In the proposed rule, we 

proposed to reduce the floor by 0.05 for 

CYs 2012 and 2013 and to eliminate the 

floor beginning in 2014 (76 FR 40509 

through 40510). We have been reducing 

the wage index floor since CY 2006 

when ESRD facilities began to transition 


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to the CBSAs and the wage index floor 

was 0.900 (70 FR 45799). We have 

reduced the wage index floor by 0.05 

each year since then. In CY 2011, the 

floor is 0.600 and only impacts ESRD 

facilities located in Puerto Rico, because 

no other ESRD facilities are located in 

areas with a wage index value below 

0.600. This is also the case in CY 2012, 

when the 0.05 reduction will bring the 

floor to 0.550. We continue to believe 

that artificially adjusting wage index 

values by substituting a wage index 

floor is not an appropriate method to 

address low wages in certain geographic 

locations. However, we are willing to 

take the points made by the commenters 

into consideration for future rulemaking 

with regard to the issue of eliminating 

the wage index floor in the future. 

With regard to the comment that 

small facilities are located in areas with 

the lowest wage index values and the 

negative effects of eliminating the floor, 

we note that the commenter is located 

in West Virginia and in CY 2011, has a 

wage index value of 0.7055, well above 

the wage index floor of 0.600. Therefore, 

the reduction of the floor does not 

impact this provider. With regard to 

areas that are impacted by the reduction 

of the wage index floor (that is Puerto 

Rico), we note that the overall impact 

(discussed in section VII.B of this final 

rule) of the changes in the outlier policy 

discussed in section I.C.10 of this final 

rule and the wage index results in a 0.3 

percent increase in estimated payments. 

Therefore, we do not believe that ESRD 

facilities will be negatively impacted by 

the reduction in the wage index floor. 

We note that the wage index values 

reflects\ hospital wages, unadjusted for 

occupational mix. Therefore, we believe 

it reflects ESRD facility staff wages. 

With regard to the comment that some 

small facilities are located in a single 

community and, as such, are not able to 

spread their operating costs as larger 

organizations can, we do not understand 

the relationship between the wage index 

floor and limitations a facility may have 

to spread its operating costs. 

After considering the comments 

received, we are finalizing the 0.05 

reduction to the wage index floor for 

CYs 2012 and 2013, resulting in a wage 

index floor of 0.550 and a wage index 

floor of 0.500, respectively. Although 

we continue to believe that artificially 

adjusting the wage index value using a 

floor, which does not reflect actual 

wages paid in that area, we will 

reconsider the floor in CY 2014. 

b. Policies for Areas With No Hospital 

Data 

In CY 2006, while adopting the CBSA 

designations for the basic case-mix 

adjusted composite payment system, we 

identified a small number of ESRD 

facilities in both urban and rural areas 

where there are no hospital data from 

which to calculate wage index values. 

Since there were ESRD facilities in these 

areas, we developed policies for each of 

these areas. In the CY 2011 ESRD PPS 

final rule (75 FR 49117), we finalized 

the methodology we have used for 

urban areas with no hospital data, that 

is, we compute the average wage index 

value of all urban areas within the State 

and use that value as the wage index. 

We also finalized the methodology 

established for rural areas with no 

hospital data originally adopted in the 

CY 2008 PFS final rule (72 FR 66283), 

in which we computed the wage index 

using the average wage index values 

from all contiguous CBSAs to represent 

a reasonable proxy for that rural area. 

For rural Massachusetts, we determined 

that the borders of Dukes and Nantucket 

Counties are continguous with 

Barnstable and Bristol counties. Under 

the methodology, the values for these 

counties are averaged to establish the 

wage index value for rural 

Massachusetts. For rural Puerto Rico, 

we finalized a policy to use the wage 

index floor as the wage index value, 

since all rural Puerto Rico areas were 

subject to the floor. 

In the proposed rule, we did not 

propose to change these methodologies. 

We proposed for CY 2012 and for future 

years, to continue to use the 

methodologies we adopted for 

establishing wage index values in both 

urban and rural geographic areas where 

there are no hospital wage data from 

which to calculate wage index values 

for ESRD facilities (76 FR 40510). 

We did not receive any comments on 

our proposed methodology for 

computing a wage index value for areas 

without hospital data for urban and 

rural geographic areas, or for Puerto 

Rico. Therefore, for CY 2012 and future 

years, we are finalizing our 

methodologies for computing a wage 

index value for areas without hospital 

data for urban and rural geographic 

areas and for Puerto Rico. For urban 

areas, we will compute the average wage 

index value of all urban areas within the 

State; for rural areas, we will compute 

the wage index using the average wage 

index values from all contiguous 

CBSAs; and for rural Puerto Rico, we 

will use the wage index floor. 

c. Wage Index Budget-Neutrality 

Adjustment 

We have broad discretion under 

section 1881(b)(14)(D)(iv)(II) of the Act 

to develop a geographic wage index. In 

addition, that section cites the wage 

index under the basic case-mix adjusted 

composite payment system as an 

example. We have previously 

interpreted the statute for the basic casemix adjusted composite payment system 

(section 1881(b)(12)(D) of the Act) as 

requiring that the geographic adjustment 

be made in a budget-neutral manner. In 

CY 2011, we did not apply a wage index 

budget-neutrality adjustment factor 

under the ESRD PPS because budgetneutrality was achieved through the 

overall 98 percent budget-neutrality 

requirement in section 1881(b)(14)(A)(ii) 

of the Act. 

Given our authority to develop a wage 

index under section 

1881(b)(14)(D)(iv)(II) of the Act, as well 

as the authority to use the geographic 

index under section 1881(b)(12)(D) of 

the Act, we proposed to apply the wage 

index in a budget-neutral manner under 

the ESRD PPS using a wage index 

budget-neutrality adjustment factor (76 

FR 40510). However, as we discuss in 

greater detail below, we proposed that 

under the ESRD PPS, we would apply 

the wage index budget-neutrality 

adjustment factor to the ESRD PPS base 

rate. 

Under the basic case-mix adjustment 

composite payment system, we began 

applying the wage index budgetneutrality adjustment factor in CY 2006 

(70 FR 70171). During the ESRD PPS 

transition, we proposed to continue to 

apply the wage index budget-neutrality 

adjustment to the wage index values for 

the composite rate portion of the ESRD 

PPS blended payment for CYs 2012 and 

2013 (76 FR 40510). We noted that 

continuing to apply the budgetneutrality adjustment to the wage index 

for the composite rate portion of the 

ESRD PPS blended payment allows 

ESRD facilities going through the 

transition to continue to use a 

methodology to which they are 

accustomed. 

However, under the ESRD PPS, we 

believed that applying the wage index 

budget-neutrality adjustment factor to 

the ESRD PPS base rate would be 

consistent with the application of the 

wage index budget-neutrality 

adjustment factor in other prospective 

payment systems. We also believed that 

applying the wage index budgetneutrality adjustment factor to the ESRD 

PPS base rate is simpler and more 

straightforward in application and 

calculation. Applying the wage index 

budget-neutrality adjustment factor to 

the ESRD PPS base rate produces results 

that are not measurably different from 

applying the adjustment factor to the 

wage index, as is done for the composite 

rate portion of the blended payment 

during the transition. We sought 


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comment on our proposal to apply the 

wage index budget-neutrality 

adjustment factor to the ESRD PPS base 

rate for purposes of the ESRD PPS 

payments and the ESRD PPS component 

of the blended payments during the 

transition. 

We did not receive any comments on 

our proposal to apply the wage index 

budget-neutrality adjustment to the 

ESRD PPS base rate and to continue to 

apply the wage index budget-neutrality 

adjustment to the wage index values for 

the composite rate portion of the 

blended payment. Therefore, for CY 

2012 and subsequent years, we are 

finalizing our proposal to apply the 

wage index budget-neutrality 

adjustment factor to the ESRD PPS base 

rate for the purposes of the ESRD PPS 

payments and the ESRD PPS portion of 

the blended payment during the 

transition. We are also finalizing our 

proposal to continue to apply the wageindex budget-neutrality adjustment 

factor directly to the ESRD wage index 

values for the composite rate portion of 

the blended payment for CY 2012 and 

CY 2013. 

Because the ESRD wage index is only 

applied to the labor-related portion of 

the composite rate, we computed the 

wage index budget-neutrality 

adjustment factor based on that portion. 

That is, the labor-related share of the 

composite rate portion of the blended 

payment of 53.711 percent. This laborrelated share was developed from the 

labor-related components of the 1997 

ESRD composite rate market basket that 

was finalized in the 2005 PFS final rule 

(70 FR 70168). The labor-related share 

of the ESRD PPS is 41.737 percent labor 

(that is, the portion of the ESRD PPS 

payment rate and the ESRD PPS portion 

of the blended payment). As discussed 

in the CY 2011 ESRD PPS final rule (75 

FR 49161), we used the 2008-based 

ESRDB market basket cost weights to 

determine the labor-related share for 

ESRD facilities under a bundled system. 

Under the ESRDB market basket, the 

labor-related share for ESRD facilities is 

41.737. These figures represent the sum 

of Wages and Salaries, Benefits, 

Housekeeping and Operations, All 

Other Labor-related Services, 87 percent 

of the weight for Professional Fees and, 

46 percent of the weight for Capitalrelated Building and Equipment 

expenses. 

To compute the proposed CY 2012 

wage index budget-neutrality 

adjustment factors, we proposed to use 

the fiscal year (FY) 2012 pre-floor, prereclassified, non-occupational mixadjusted hospital data to compute the 

wage index values, 2010 outpatient 

claims (paid and processed as of 

December 31, 2010), and geographic 

location information for each facility 

which, may be found through Dialysis 

Facility Compare (76 FR 40510–40511). 

Dialysis Facility Compare can be found 

at the Dialysis Facility Compare Web 

page on the CMS Web site at http:// 

www.cms.hhs.gov/ 

DialysisFacilityCompare/. The FY 2012 

hospital wage index data for each urban 

and rural locale by CBSA may also be 

accessed on the CMS Web site at 

http://www.cms.hhs.gov/ 

AcuteInpatientPPS/WIFN/list.asp. The 

wage index data are located in the 

section entitled, ‘‘FY 2012 Final Rule 

Occupational Mix Adjusted and 

Unadjusted Average Hourly Wage and 

Pre-Reclassified Wage Index by CBSA.’’ 

We did not receive any comments on 

the methodology used to compute the 

budget-neutrality adjustment factors. 

Therefore, for CY 2012 and beyond, we 

are finalizing the methodology we 

proposed for computing the CY 2012 

wage index budget-neutrality 

adjustment factors (76 FR 40510 and 

40511). Using treatment counts from the 

2010 claims and facility-specific CY 

2011 payment rates, we computed the 

estimated total dollar amount each 

ESRD facility would have received in 

CY 2011. The total of these payments 

became the target amount of 

expenditures for all ESRD facilities for 

CY 2012. Next, we computed the 

estimated dollar amount that would 

have been paid for the same ESRD 

facilities using the final ESRD wage 

index for CY 2012. The total of these 

payments becomes the new CY 2012 

amount of wage-adjusted payment rate 

expenditures for all ESRD facilities. 

After comparing these two dollar 

amounts (target amount divided by the 

new CY 2012 amount), we calculated 

two wage index budget-neutrality 

adjustment factors that, when 

multiplied by the applicable CY 2012 

estimated payments, would result in 

aggregate payments to ESRD facilities 

that would remain budget-neutral when 

compared against the target amount of 

payment rate expenditures. The first 

factor was applied to the ESRD PPS base 

rate. The second factor was applied to 

the wage index values for the composite 

rate portion of the blended payment. 

Therefore, in this final rule, we are 

finalizing for CY 2012, the wage index 

budget-neutrality adjustment factor for 

the composite portion of the ESRD PPS 

blended payment of 1.002830, which is 

applied directly to the ESRD wage index 

values. For the ESRD PPS (that is, for 

the full ESRD PPS payments and the 

ESRD PPS portion of the blended 

payments during the transition), we are 

finalizing the wage index budgetneutrality adjustment factor of 1.001520 

which is applied to the ESRD PPS base 

rate. Under the ESRD PPS, the wage 

index floor for CY 2012 is 0.550 because 

the wage index budget-neutrality 

adjustment factor is applied to the base 

rate. 

As we indicated in the proposed rule 

(76 FR 40511), because we apply the 

wage index budget-neutrality 

adjustment factor to the wage index 

values to ensure budget-neutrality under 

the composite rate portion of the 

blended payment, we also apply the 

wage index budget-neutrality 

adjustment factor to the wage index 

floor. We note this would apply to areas 

in Puerto Rico subject to the floor. 

Therefore, for the composite rate portion 

of the blended payment, we are 

finalizing for CY 2012 to apply the wage 

index budget-neutrality adjustment 

factor to the wage index floor of 0.550 

which results in an adjusted wage index 

floor of 0.552 (1.002830 × 0.550). 

d. ESRD PPS Wage Index Tables 

The CY 2012 ESRD wage index tables, 

referred to as Addendum A (ESRD 

facilities located in urban areas), and 

Addendum B (ESRD facilities located in 

rural areas) are posted on the CMS Web 

site at: http://www.cms.gov/ 

ESRDPayment/PAY/list.asp. The wage 

index tables list two separate columns 

of wage index values. One column 

represents the wage index values for the 

composite rate portion of the blended 

payment to which the wage index 

budget-neutrality adjustment factor has 

been applied. The other column lists the 

wage index values for the ESRD PPS, 

which does not reflect the application of 

the wage index budget-neutrality 

adjustment factor, because as we 

discussed above, we apply the wage 

index budget-neutrality adjustment 

factor to the ESRD PPS base rate. 

8. Drugs 

a. Vancomycin 

In the CY 2011 ESRD PPS final rule 

(75 FR 49050 through 49052), we stated 

that antibiotics used for the treatment of 

venous access infections and peritonitis, 

are renal dialysis services under the 

ESRD PPS. Payments for anti-infective 

drugs in injectable forms (covered under 

part B) and oral or other forms of 

administration (formerly covered under 

part D) used in the treatment of ESRD, 

were included in computing the final 

ESRD PPS base rate and, would not be 

separately paid under the ESRD PPS. 

We also noted that the oral versions of 

vancomycin are not used for ESRDrelated conditions and, therefore, would 

not be considered a renal dialysis 


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service. We further stated that any antiinfective drug or biological used for the 

treatment of ESRD-related conditions 

would be considered a renal dialysis 

service and, not eligible for separate 

payment. We noted this policy also 

applies to any drug or biological that 

may be developed in the future. We 

established edits to ensure that separate 

payment could not be made to ESRD 

facilities for vancomycin which has 

traditionally been used by ESRD 

facilities to treat access infections. 

In the proposed rule (76 FR 40511), 

we acknowledged that since the 

publication of the CY 2011 ESRD PPS 

final rule, we had received numerous 

comments indicating that vancomycin is 

indicated in the treatment of both ESRD 

and non-ESRD conditions, such as skin 

infections. We further stated that after 

consultation with our medical experts, 

we concurred with the commenters. 

Therefore, we proposed to eliminate the 

restriction on vancomycin to allow 

ESRD facilities to receive separate 

payment by placing the AY modifier on 

the claim for vancomycin when 

furnished to treat non-ESRD-related 

conditions. In accordance with ICD–9 

guidelines, as described in the ESRD 

PPS final rule (75 FR 49107), the ESRD 

facility would also be required to 

indicate the diagnosis code for which 

the vancomycin is indicated. We noted 

that treatment of any skin infection that 

is related to renal dialysis access 

management would be considered a 

renal dialysis service and would 

continue to be paid under the ESRD 

PPS, and no separate payment would be 

made. We sought public comments on 

our proposal to eliminate the restriction 

on vancomycin to allow ESRD facilities 

to receive separate payment for these 

drugs when furnished to treat nonESRD-related conditions. The comments 

we received and our responses are set 

forth below: 

Comment: Two commenters suggested 

that we allow for separate payment for 

daptomycin when furnished by ESRD 

facilities for non-ESRD related 

conditions. 

Response: We thank the commenter 

for the suggestion to allow for separate 

payment of daptomycin when used for 

non-ESRD related conditions. As noted 

above, we had established system edits 

to ensure that ESRD facilities could not 

be paid separately for both vancomycin 

and daptomycin. We will consider 

removing the system edit for 

daptomycin in future rulemaking. 

Comment: We received six comments 

in support of our proposal to eliminate 

the restriction on vancomycin and allow 

for separate payment when furnished 

for non-ESRD-related conditions. 

Response: We thank the commenters 

for their support. Consequently, in this 

final rule we are finalizing the proposal 

to eliminate the restriction on 

vancomycin to allow ESRD facilities to 

receive separate payment by placing the 

AY modifier on the claim for 

vancomycin when furnished to treat 

non-ESRD related conditions. In 

accordance with ICD–9 guidelines as 

described in the CY 2011 ESRD PPS 

final rule (75 FR 49107), the ESRD 

facility must indicate the diagnosis code 

for which the vancomycin is indicated. 

We reiterate that treatment of any skin 

infection that is related to renal dialysis 

access management would be 

considered a renal dialysis service and 

would continue to be paid under the 

ESRD PPS, and no separate payment 

would be made. 

b. Drug Overfill 

In the CY 2011 PFS final rule (75 FR 

73466), we explained the methodology 

for Part B payment for drugs and 

biologicals that include intentional 

overfill, and that the Medicare average 

sales price (ASP) payment limit is based 

on the amount of drug conspicuously 

indicated on the labeling approved by 

the Food and Drug Administration 

(FDA). We indicated that we had 

become aware of situations where 

manufacturers intentionally included a 

small amount of overfill in drug 

containers, and that this overfill is 

provided at no extra charge to the 

provider. We also noted that we 

understood the intent of the intentional 

overfill was to compensate for product 

loss during the proper preparation and 

administration of a drug. We explained 

that ASP calculations are based on data 

reported by manufacturers, including 

‘‘volume per item’’. Therefore, providers 

may only bill for the amount of drug 

product actually purchased and the cost 

that the product represents (75 FR 

73467). 

We stated in the proposed rule (76 FR 

40511) that this part B provision applies 

under the ESRD PPS. We explained that 

ESRD facilities receiving blended 

payments under the transition would 

receive payments based on ASP for 

separately billable ESRD drugs and 

biologicals for the composite rate 

portion of the blend. In addition, under 

the ESRD PPS outlier policy, the ESRDrelated drugs that ESRD facilities report 

on claims are priced for the outlier 

policy using ASP prices. Therefore, 

ESRD facilities may only report units 

and charges for drugs or biologicals 

actually purchased. 

Comment: Three commenters 

expressed concern that the drug overfill 

policy was not appropriate under the 

ESRD PPS. One commenter stated that 

the use of overfill is an efficient 

operation and expressed concern that 

the new policy would lead to excessive 

wastage. A commenter disagreed with 

our assertion that overfill is provided by 

manufacturers without charge to the 

provider and stated that there would be 

additional costs if facilities are not 

allowed to maximize drug usage. The 

commenter believes the cost to 

providers includes the full amount of 

drug in each vial. One commenter stated 

that dialysis providers may and should 

administer overfill if clinically 

appropriate to reduce costs and waste. 

The commenter cited the administration 

of EPO as an example. One commenter 

stated that, ‘‘* * * providers have been 

purchasing drugs with overfill amounts 

and use of the overfill amount has long 

been known by both the Office of 

Inspector General (OIG) and CMS.’’ 

Response: We disagree with the 

commenters that believe our proposal 

would restrict the clinical use of 

intentional overfill. As we indicated in 

the CY 2011 PFS final rule (75 FR 

73467), our policy here is not intended 

to limit the use of intentional overfill 

during the care of beneficiaries or in 

medical practice; such measures are 

beyond CMS’ authority. Rather, the 

proposed rule merely set forth how and 

under what conditions we would make 

payment under the ESRD PPS outlier 

policy. Consistent with prior 

rulemaking, under our authority in 

section 1881(b)(14)(D)(ii) of the Act, we 

are adopting the ASP policy on overfill 

for purposes of calculating the outlier 

payment. We believe the use of the ASP 

policy for purposes of calculating the 

outlier payment is appropriate because, 

for the reasons stated, we believe 

overfill does not represent a cost to the 

facility; thus, overfill should not factor 

into our determination of outlier 

payments. This rule does not purport to 

regulate the use of overfill, only whether 

it is reimbursed under our outlier policy 

and the composite rate portion of the 

blended payment during the transition. 

Thus, whether we or the OIG had 

information about certain providers’ 

purchase and use of overfill is 

irrelevant. 

Comment: A large dialysis 

organization indicated that the drug 

overfill policy should not apply to ESRD 

facilities because the ASP payment 

regulation applies to drugs ‘‘not paid on 

a cost or prospective payment system 

basis.’’ The commenter contends it 

would not apply under the ESRD PPS 

even though outlier eligible drugs are 

priced using the ASP prices established 

under section 1847A of the Act. The 

commenter stated that CMS cannot 


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substitute the ASP method for a portion 

of the ESRD PPS. The commenter 

further contends that because dialysis 

providers may administer overfill, but 

CMS’s proposal would prohibit them 

from submitting a claim that includes 

overfill, it appears that CMS expects 

providers either to inaccurately state the 

services furnished on the claims form or 

incur significant expense to separately 

track overfill amounts, which may be 

used for thousands of patients daily, 

resulting in unnecessary burden. The 

commenter opined that applying the 

ASP payment rule under the ESRD PPS 

is inconsistent with the policy 

objectives of a PPS leading to wastage if 

facilities continue to use single-use vials 

or extra expenses if facilities migrate to 

multi-dose vials. 

Response: We disagree with these 

comments. First, as noted above, we 

proposed to incorporate into our outlier 

policy the policy for overfill under the 

ASP methodology; however, our 

authority to determine an outlier policy 

is found in section 1881(b)(14) of the 

Act, which calls for a prospective 

payment basis for renal dialysis services 

and authorizes an outlier payment 

adjustment. Thus, contrary to the 

commenter’s assertion, we are paying 

for drugs subject to the ESRD PPS 

outlier policy under a prospective 

payment system, not under section 

1847A of the Act. Under the outlier 

policy, we use the ASP methodology, 

which is based upon manufacturer 

reporting of the labeled amount of a 

drug and not any other amount (that is, 

overfill amount). Therefore, we are 

establishing that the ESRD PPS outlier 

policy does not include an amount for 

overfill. Further, the outlier policy was 

designed to provide additional 

payments for high cost patients. To the 

extent a patient receives drug amounts 

at no cost to the facility (that is, overfill 

amounts), that amount may not be 

attributed to the cost of that patient. 

Finally, because we are continuing to 

pay under the composite rate portion of 

the blended payment for separately 

billable drugs using the ASP payment 

methodology, we should continue to 

utilize the methodology for pricing 

drugs for the outlier policy. 

Second, the commenter’s contention 

about the scope of the ‘‘incident to’’ 

benefit reflects a misunderstanding of 

our proposal. We refer the commenter to 

discussion of the overfill policy in the 

CY 2011 PFS final rule (75 FR 73469), 

where we stated that our ASP overfill 

policy is not based on the ‘‘incident to’’ 

rules, but rather applies to all drugs and 

biologicals paid under section 1847A of 

the Act, regardless of setting. The 

‘‘incident to’’ rules are similarly 

irrelevant to our proposal here. Our 

policy pertains only to how and 

whether we pay for drugs under our 

outlier policy under authority of section 

1881(b)(14)(D)(ii) of the Act. 

Third, we disagree with the 

commenters that our policy will require 

ESRD facilities to inaccurately reflect 

the services they furnish. We expect that 

providers will continue to maintain 

accurate medical records for all 

beneficiaries as well as accurate 

inventory records of all drugs that were 

actually purchased and appropriately 

billed to Medicare. We acknowledge 

that separate tracking of overfill may 

increase burden on ESRD facilities that 

were not doing so before. However, 

given that we have adopted ASP 

policies generally for outliers under the 

ESRD PPS and we rely on data reported 

under the ASP methodology to 

determine the outlier thresholds, even if 

we believed overfill were something 

other than free product, we would have 

no ability to account for it separately. 

Finally, we disagree that our policy is 

inconsistent with waste reduction. As 

noted above, our policy does not apply 

to the use of overfill; rather, it applies 

only to whether we pay for overfill 

under our outlier policy. ESRD facilities 

remain free to take steps to reduce drug 

wastage and in doing so, reduce their 

costs in providing ESRD services—our 

policy only prevents an ESRD facility 

from accounting for something for 

which it incurred no cost in 

determining whether it met the high 

cost outlier policy. 

We are finalizing our proposal to 

incorporate the ASP overfill policy into 

our outlier policy and for purposes of 

the composite rate portion of the 

blended payment during the transition. 

Thus, ESRD facilities may only report 

units and charges for drugs and 

biologicals actually purchased. 

9. Revisions to Patient-Level 

Adjustment for Body Surface Area 

(BSA) 

Under section 1881(b)(14)(D)(i) of the 

Act, the bundled ESRD PPS must 

include a payment adjustment based on 

case-mix that may take into account 

patient weight, body mass index (BMI), 

body surface area (BSA), and other 

appropriate factors. In the proposed rule 

(76 FR 40511 and 40512), we explained 

that we evaluated height and weight 

because the combination of these two 

characteristics allows us to analyze two 

measures of body size: BSA and BMI. 

We further explained that both body 

size measures are strong predictors of 

variation in payment for ESRD patients. 

As a result, in developing the ESRD 

PPS, we established a case-mix patient 

level adjustment for BSA that would be 

applied to each 0.1 m2 change in BSA 

compared to the national average. 

In the proposed rule (76 FR 40511 and 

40512), we proposed to make one 

change related to the use of the national 

BSA average value used in the 

calculation of the BSA adjustment 

applied to the composite rate portion of 

the blended payment during the 

transition. This change was necessary 

because we believe that the BSA 

national average used to compute 

payment under the composite rate 

portion of the blended rate and under 

the ESRD PPS should be both the most 

recent and consistent measurement 

available. We further explained that for 

CY 2011, the BSA adjustment we 

calculated for the composite rate portion 

of the blended payment used the BSA 

national average of 1.84, which reflected 

the average among Medicare dialysis 

patients in 2002. However, the BSA 

national average we used for computing 

the BSA under the ESRD PPS was 1.87, 

which reflected the national average 

among Medicare dialysis patients in 

2007. We did not realize that we had 

used 2 different national averages in CY 

2011, nor was it brought to our attention 

during the comment period. For CY 

2012 and in subsequent years, we 

proposed to use one national average for 

computing the BSA under the 

composite rate portion of the blended 

payment during the transition and 

under the ESRD PPS. 

In the CY 2004 PFS final rule (69 FR 

66329), we explained that the BSA 

factor was defined as an exponent equal 

to the value of the patient’s BSA minus 

the reference. For example, for a 

beneficiary with a BSA of 1.94, using 

the CY 2011 national average of 1.84 

under the composite rate would yield a 

BSA adjustment factor of 1.0370. For the 

same patient, using the national average 

of 1.87 used for the CY 2011 ESRD PPS 

BSA computation would yield a BSA 

adjustment factor of 1.0258. A ratio or 

proportional difference of 1.0258 

divided by 1.0370 equals .9892 

difference the between the two BSA 

adjustment factors. This corresponds to 

a reduction of 1.08 percent (1¥0.9892 = 

0.0108) in the composite rate payment 

for adult patients by increasing the BSA 

reference value from 1.84 to 1.87. 

In Table 3 of the proposed rule (76 FR 

40512), we showed the impact of 

increasing the composite rate BSA 

reference value from 1.84 to 1.87 for 

each year from 2011 to 2014, on facility 

payments for ESRD facilities going 

through the transition. The impact on 

facility payments are greatest in 2011, 

where the blended payment during the 

transition period is weighted more 


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heavily towards the basic case-mix 

adjusted composite payment system, 

and declines through 2014 when there 

is no impact on facility payments under 

a fully implemented PPS. 

Therefore, for CY 2012, we proposed 

to use the latest national average (that is, 

1.87) as the reference point for the 

computation of the BSA adjustment for 

both the composite rate portion of the 

blended payment and for the ESRD PPS 

(76 FR 40512). We also proposed to 

review the BSAs on CY 2012 claims 

(and every 5 years thereafter) to 

determine if any adjustment to the 

national average would be required in 

the future. We sought comments on 

these proposals. The two comments we 

received and our responses are set forth 

below: 

Comment: One organization that 

represents small dialysis organizations 

supported the proposals to use the 1.87 

reference point for computing the BSA 

and to review the BSA calculation every 

five years. One independent ESRD 

facility opposed the change in the 

reference point stating that it will 

negatively impact facilities that opted to 

receive payment under the transition 

because it will reduce the composite 

rate payment. The commenter 

referenced the table in the proposed rule 

that displays the negative effect. 

Response: We thank the national 

organization for its support of our 

proposals and appreciate the concerns 

expressed by the ESRD facility. We 

regret that we had not identified the 

discrepancy in the values used in the 

CY 2011 ESRD PFS and CY 2011 ESRD 

PPS final rules. However, as we 

indicated in the CY 2012 proposed rule, 

we believe the change is necessary 

because the BSA national average used 

to compute the composite rate portion 

of the blended payment and under the 

ESRD PPS should be both the most 

recent and consistent measurement 

available. 

After considering the public 

comments and for the reasons noted 

above, in this final rule, for CY 2012, we 

are finalizing our proposal to use the 

BSA national average of 1.87, which is 

the latest national average, as the 

reference point for the computation of 

the BSA adjustment for both the 

composite rate portion of the ESRD PPS 

blended payment and for the ESRD PPS. 

We are also finalizing our proposal to 

review the BSA national average on the 

CY 2012 claims and every 5 years 

thereafter to determine if any 

adjustment to the national average will 

be required in the future. 

10. Revisions to the Outlier Policy 

Section 1881(b)(14)(D)(ii) of the Act 

requires that the ESRD PPS include a 

payment adjustment for high cost 

outliers due to unusual variations in the 

type or amount of medically necessary 

care, including variability in the amount 

of erythropoiesis stimulating agents 

(ESAs) necessary for anemia 

management. In the CY 2011 ESRD PPS 

final rule, we stated that for purposes of 

determining whether an ESRD facility 

would be eligible for an outlier 

payment, it would be necessary for the 

facility to identify the actual ESRD 

outlier services furnished to the patient 

by line item on the monthly claim (75 

FR 49142). 

Medicare regulation § 413.237(a)(1) 

provides that ESRD outlier services 

include: (1) ESRD-related drugs and 

biologicals that were or would have 

been, prior to January 1, 2011, 

separately billable under Medicare Part 

B; (2) ESRD-related laboratory tests that 

were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare part B; (3) medical/ 

surgical supplies, including syringes 

used to administer ESRD-related drugs, 

that were or would have been, prior to 

January 1, 2011, separately billable 

under Medicare Part B; and (4) renal 

dialysis service drugs that were or 

would have been, prior to January 1, 

2011, covered under Medicare Part D, 

excluding ESRD-related oral-only drugs. 

Drugs, laboratory tests, and medical/ 

surgical supplies that we would 

recognize as outlier services were 

specified in Attachment 3 of Change 

Request 7064, issued August 20, 2010 

under Transmittal 2033. Transmittal 

2033 was rescinded and replaced by 

Transmittal 2094, dated November 17, 

2010. The replacement document 

involved the (1) Deletion of several 

drugs; (2) identified drugs that may be 

eligible for ESRD outlier payment; (3) 

provided a list of laboratory tests that 

comprise the AMCC tests; (4) deleted 

several laboratory tests; and (5) included 

the latest version of the ESRD PRICER 

layout file. Transmittal 2094 was 

subsequently rescinded and was 

replaced by Transmittal 2134 issued 

January 14, 2011. That transmittal was 

issued to correct the subject on the 

transmittal page and made no other 

changes. 

Medicare regulations at 

§ 413.237(a)(2) through (a)(6), and (b) 

specify the methodology used to 

calculate outlier payments. An ESRD 

facility is eligible for an outlier payment 

if its actual or imputed Medicare 

Allowable Payment (MAP) amount per 

treatment for ESRD outlier services 

exceeds a threshold. The MAP amount 

represents the average incurred amount 

per treatment for services that were or 

would have been considered separately 

billable services prior to January 1, 

2011. The threshold is equal to the 

ESRD facility’s predicted ESRD outlier 

services MAP amount per treatment 

(which is case-mix adjusted) plus the 

fixed dollar loss amount. In accordance 

with § 413.237(c) of the regulation, 

facilities are paid 80 percent of the per 

treatment amount by which the imputed 

MAP amount for outlier services (that is, 

the actual incurred amount) exceeds 

this threshold. ESRD facilities are 

eligible to receive outlier payments for 

treating both adult and pediatric 

dialysis patients. 

In the CY 2011 ESRD PPS final rule, 

using 2007 data, we established the 

outlier percentage at 1.0 percent of total 

payments (75 FR 49142 through 49143). 

We also established the fixed dollar loss 

amounts that are added to the predicted 

outlier services MAP amounts. The 

outlier services MAP amounts and fixed 

dollar loss amounts are different for 

adult and pediatric patients due to 

differences in the utilization of 

separately billable services among adult 

and pediatric patients (75 FR 49140). 

a. Revisions Related to Outlier ESRD 

Drugs and Biologicals 

Attachment 3 of Change Request 7064 

issued August 20, 2010 under 

Transmittal 2033, as modified by 

Transmittal 2094 issued November 17, 

2010 and Transmittal 2134 issued 

January 14, 2011, specified the former 

separately billable Part B drugs that are 

recognized as ESRD-related eligible 

outlier services and, the former Part D 

drugs by National Drug Code (NDC) for 

the three vitamin D analogues 

(calcitriol, paracalcitol, and 

doxercalciferol) and levocarnitine that 

are recognized as eligible outlier service 

drugs. 

In the proposed rule (76 FR 40513), 

we indicated that we had intended to 

update both the lists of former part B 

drugs and biologicals and former part D 

drugs that are outlier services (75 FR 

49138). However, we concluded that 

any CMS prepared lists of drugs and 

biologicals recognized as outlier 

services may be difficult to keep up-todate. We recognized that this is 

attributed to the lag in the receipt of 

claims data; changes in ESRD practice 

patterns; and inadvertent omissions and 

oversights. Because the regulation 

defines eligible outlier service drugs, we 

believe there is no need for CMS to 

issue a list of former separately payable 

part B ESRD outlier services drugs. 

Furthermore, because the list of drugs is 


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derived from paid ESRD claims, it 

would not be comprehensive, 

completely represent drugs and 

biologicals furnished to ESRD patients, 

accurate, or up-to-date. We noted that, 

consistent with current policy, all 

composite rate drugs, as defined in the 

Medicare Benefit Policy Manual, Pub. 

100–02, chapter 11, section 30.4.1, 

would not be eligible for an outlier 

payment, as these drugs would not have 

been separately paid under Part B or 

Part D prior to January 1, 2011, and do 

not meet the definition of outlier 

services. Consequently, we proposed to 

eliminate the issuance of a list of former 

separately payable Part B drugs and 

biologicals that would be eligible for 

outlier payments. Accordingly, we 

solicited public comments on our 

proposal to eliminate the issuance of a 

specific list of eligible outlier service 

drugs which were or would have been 

separately billable under Medicare Part 

B prior to January 1, 2011. 

The comments on our proposal and 

our responses are summarized below. 

Comment: Two national associations 

supported the proposal to eliminate the 

drug and biological list. Both 

commenters supported the creation of a 

list through guidance. One commenter 

indicated that the list would maintain 

transparency, but recognized that this 

would create a rulemaking burden. The 

commenter further requested that CMS 

ensure that process remains transparent 

and subject to input from stakeholders. 

Response: We thank the commenter’s 

for their support of our proposal. As we 

indicated, any CMS prepared lists of 

drugs and biologicals recognized as 

outlier services may be difficult to keep 

up-to-date due to the factors described 

above. 

Because we are concerned that a 

failure to include a drug or biological on 

the outlier services list will negatively 

impact ESRD facilities by limiting the 

drugs eligible for the outlier policy, in 

this final rule, we are finalizing the 

proposal to eliminate the issuance of a 

specific list of eligible outlier service 

drugs which were or would have been 

separately billable under Medicare part 

B prior to January 1, 2011. However, 

under separate guidance, we plan to 

continue to identify renal dialysis 

service drugs which were or would have 

been covered under Part D for outlier 

eligibility purposes in order to provide 

unit prices for calculating imputed 

outlier services. 

With respect to the comment 

regarding transparency, we recognize 

the need to be transparent and have 

sought input from stakeholders. We 

believe that we have been transparent 

by the inclusion of proposed changes to 

outlier drugs and biologicals under the 

ESRD PPS in the proposed rule, (76 FR 

40513 and 40514) and our request for 

comments. 

Under current policy, antibiotics 

furnished in the home are considered to 

be composite rate drugs and therefore, 

not eligible for outlier payment. In the 

proposed rule (76 FR 40513), we 

discussed that Pub. 100–02, chapter 11, 

section 30.4.1 lists the drugs covered 

under the composite rate. The list 

includes a statement that antibiotics 

when used at home by a patient to treat 

an infection of the catheter site or 

peritonitis associated with peritoneal 

dialysis are considered composite rate 

drugs. Because composite rate drugs and 

their administration (both the staff time 

and the supplies) are covered under the 

composite rate, antibiotics furnished in 

the patient’s home used for the reasons 

noted above may not be billed and paid 

separately. However, antibiotics 

furnished in an ESRD facility are 

considered separately payable in 

accordance the Medicare Claims 

Processing Manual, Pub. 100–04, 

chapter 8, section 60.2.1.1. 

We also noted that Pub. 100–02, 

chapter 11, section 50.9 states that an 

antibiotic used at home by a patient to 

treat an infection of the catheter site or 

peritonitis associated with peritoneal 

dialysis is covered as home dialysis 

supplies included in the Method II 

(Direct Dealing) payment cap for home 

dialysis supplies administered by the 

Durable Medical Equipment (DME) 

Supplier. Prior to January 1, 2011, under 

Method II, durable medical equipment 

suppliers received direct payment from 

Medicare for furnishing dialysis services 

to home dialysis patients. Effective 

January 1, 2011, as indicated in 

§ 413.210(b) of the regulations, CMS 

does not pay any entity or supplier 

other than ESRD facilities for covered 

items and services furnished to a 

Medicare beneficiary. Therefore, 

payment to DME suppliers for 

antibiotics under Method II can no 

longer be made. Additionally, under the 

ESRD PPS, the dialysis facility is 

responsible for furnishing all renal 

dialysis services, regardless of the site of 

service. Under the ESRD PPS, there is 

no payment distinction made as to the 

site where a renal dialysis service is 

provided (that is, in the home or in a 

facility). 

Therefore, in the proposed rule, (76 

FR 40513 and 40514), we indicated that 

we did not believe that it would be 

appropriate to have a distinction in 

which antibiotics administered in an 

ESRD facility, used to treat an infection 

of the catheter or other access site, or 

peritonitis associated with peritoneal 

dialysis, would be considered as 

separately billable under the composite 

rate portion of the blended payment and 

eligible for outlier payments under the 

ESRD PPS, while antibiotics used at 

home by home patients for the same 

purpose would be considered to be 

included in the composite rate and not 

eligible for outlier payments. We 

proposed to eliminate the inclusion of 

antibiotics when used in the home to 

treat an infection of the catheter site or 

peritonitis associated with peritoneal 

dialysis as part of the composite rate 

drugs, and allow them to be separately 

paid under the composite portion of the 

blended payment for ESRD facilities 

receiving payment during the transition. 

We also proposed that antibiotic drugs 

used at home to treat catheter site 

infections or peritonitis associated with 

peritoneal dialysis would be eligible as 

ESRD outlier services. Antibiotics 

furnished in facility would continue to 

be recognized as ESRD outlier services. 

We solicited comments on our 

proposal. The comments and our 

responses are summarized below. 

Comment: One national association 

and one dialysis organization agreed 

with the proposal that home antibiotics 

to treat catheter site infections or 

peritonitis associated with peritoneal 

dialysis would qualify as eligible for 

outlier payment. 

Response: We thank the commenter 

for their support. 

In this final rule, we are finalizing the 

proposal to recognize antibiotics 

furnished in the home to treat catheter 

site infections or peritonitis associated 

with peritoneal dialysis as eligible for 

outlier payment. We believe the 

inclusion of antibiotics used by home 

dialysis patients as outlier services will 

reduce confusion over drugs and 

biologicals that are eligible outlier 

services and eliminate the distinction in 

the eligibility of a drug for outlier 

eligibility based on where it is 

furnished. As new drugs emerge, we 

intend to update the HCPCS codes 

corresponding to new drugs and 

biologicals for billing purposes, and to 

determine whether any of those drugs 

would have been considered to be 

composite rate drugs. Drugs and 

biologicals which were or would have 

been considered composite rate drugs 

are not eligible ESRD outlier services 

under § 413.237. 

In the proposed rule (76 FR 40514), 

we proposed two modifications to the 

computation of the separately billable 

MAP amounts used to calculate outlier 

payments for the reasons described 

below. We explained that subsequent to 

the publication of the CY 2011 ESRD 

PPS final rule, our clinical review of the 


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2007 ESRD claims used to develop the 

ESRD PPS revealed that dialysis 

facilities routinely used alteplase and 

other thrombolytic drugs for access 

management purposes. Under the ESRD 

Benefit Policy Manual, Pub. 100–02, 

chapter 11, section 30.4.1, drugs used as 

a substitute for any of the listed items, 

or are used to accomplish the same 

effect, are covered under the composite 

rate. Because heparin is a composite rate 

drug and could be used for access 

management, any drug or biological 

used for the same purpose may not be 

separately paid. Because outlier 

payments are restricted under 

§ 413.237(a) to those items or services 

that were or would have been 

considered separately billable prior to 

January 1, 2011, we proposed to 

recalculate the average outlier services 

MAP amounts to exclude these 

composite rate drugs (that is, we 

proposed to exclude thrombolytics from 

the computation). 

We also explained in the proposed 

rule that in developing the outlier 

service MAP amounts for 2011, we 

excluded testosterone and anabolic 

steroids. We subsequently learned from 

discussions with clinicians and ESRD 

facilities, that these drugs can be used 

for anemia management. Because drugs 

used for anemia management in ESRD 

patients were or would have been 

considered separately billable under 

Medicare part B, these drugs would be 

considered outlier services under 

§ 413.237(a)(1). Consequently, we have 

recomputed the outlier service MAP 

amounts for CY 2012 to include these 

drugs. As shown in Table 2, when 

comparing the outlier service MAP 

amounts based on the current definition 

of ESRD outlier services to the revised 

ESRD outlier definition, the net effect of 

these two revisions (the exclusion of 

thrombolytic drugs and inclusion of 

anabolic steroids) results in an decrease 

to the outlier service MAP amounts by 

$4.00 for adult patients and a decrease 

of $0.50 for pediatric patients. 

We solicited comment on the two 

modifications to the computation of the 

separately billable MAP amounts used 

to calculate outlier payments we 

proposed. The comments received and 

our responses are set forth below. 

Comment: We received several 

comments opposing the proposal to 

exclude thrombolytic drugs used for 

access management from the outlier 

services MAP amounts and therefore, 

not eligible for outlier payments. One 

national organization believes that there 

should be a longer experience with the 

use of thrombolytics under a bundled 

system before excluding them from 

outlier payments. The commenter stated 

that when properly used, these agents 

may help avoid unnecessary (and 

expensive) access procedures and 

interventions. The commenter further 

believes that the outlier payment policy 

could adversely impact their proper use 

and lead to greater vascular access 

procedures outside of the dialysis unit 

and could be ‘‘detrimental to patients’ 

outcomes.’’ 

Response: We do not understand the 

value that longer experience with the 

use of thrombolytics under a bundled 

system before excluding them from the 

outlier policy would provide. We 

believe that the determination the 

furnishing of a drug should be based 

upon the patient’s needs and remain 

independent of the outlier policy. We 

believe that maintaining vascular access 

is a renal dialysis service and ESRD 

facilities would continue to be 

responsible for furnishing the service. 

We also expect that ESRD facilities 

would refer patients to another setting if 

medically necessary and we would not 

expect ESRD facilities to address any 

and all vascular access complications if 

doing so would be unsafe. 

With regard to the comment about 

proper use of thrombolytics, the efficacy 

or merit of thrombolytics is not in 

question with their exclusion from the 

outlier policy. We believe that the ESRD 

PPS provides an opportunity for ESRD 

facilities to make decisions based on the 

medical need of patients and not on the 

basis of financial gain. That is, under 

current policy, a facility may choose to 

use a thrombolytic (alteplase) because 

those drugs are eligible under the outlier 

policy, rather than using an 

anticoagulant (heparin) which is not 

eligible. By no means are we implying 

that thrombolytics or any access 

management drug should not be used 

when clinically indicated. But rather, 

we are saying that payment policy is not 

intended to dictate, determine, or 

influence clinical practice or favor one 

course of treatment over another. It is 

intended to ensure that decisions are 

not made solely on the basis of financial 

gain but based on clinical judgment. 

Finally, as we discussed above, the 

Medicare Benefit Policy Manual, Pub. 

100–02, chapter 11, section 30.4.1, 

states that drugs used as a substitute for 

any of the listed items or are used to 

accomplish the same effect are covered 

under the composite rate. Because 

heparin is included in the composite 

rate and is used to ensure patency of an 

access site and proper flow during the 

dialysis treatment, as we discuss in 

greater detail below, we interpret this 

provision to mean that any drug used to 

ensure patency of an access site and 

proper flow during the dialysis 

treatment and, therefore, would be more 

properly considered a composite rate 

drug. 

Comment: An independent ESRD 

facility noted that alteplase was 

separately billable under the composite 

rate and was not considered 

‘‘interchangeable with heparin’’. The 

commenter further indicates that 

alteplase had been included in the CY 

2011 MAP. Finally, the commenter 

indicated that the decision made by this 

facility to receive payment under the 

transition was made in part because 

alteplase was separately paid under the 

composite rate system and CMS 

included alteplase and other 

thrombolytics under the outlier policy. 

Response: The commenter is correct 

that alteplase was separately billable 

under the composite payment system 

and was included in the CY 2011 MAP 

amounts for the outlier policy. Because 

we did not propose to alter that policy 

with regard to the composite rate 

portion of the blended payment and the 

policy was only discussed in the context 

of the outlier policy, we do not believe 

it would be appropriate to make the 

change at this time. Therefore, as 

indicated above, in CY 2012, 

thrombolytics furnished by an ESRD 

facility will continue to receive separate 

payment under the composite rate 

portion of the blended payment. 

While we acknowledge that in the 

development of the ESRD PPS, alteplase 

was included in the computation of the 

MAP amounts and eligible for outlier 

payments, we proposed to rectify this 

situation in the proposed rule because 

we believe that making one access 

management drug eligible for outlier 

payment while making another 

ineligible should not exist. We also note 

that since heparin predated the use of 

thrombolytics in dialysis access patency 

and management and heparin was 

included in the composite rate, we 

believe that any drug or biological 

including other anticoagulants, 

thrombolytics or any other type of drug 

that may be used in the future for access 

patency and management would also be 

considered a composite rate drug. 

Comment: One pharmaceutical 

company indicated that it did not 

promote the ‘‘off-label’’ use of alteplase 

in the dialysis setting. The commenter 

expressed concern that the proposed 

change for outlier payments for 

alteplase will provide a disincentive for 

appropriate vascular access practices 

and management, resulting in a negative 

effect on patients. The commenter stated 

that the manual cited in the proposed 

rule includes a list of specific drugs, 

heparin is listed but does not include 

alteplase or other thrombolytic. The 


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commenter further stated that the next 

section of the manual requires separate 

billing for thrombolytics used to declot 

central venous catheters. The 

commenter acknowledged that heparin 

and alteplase are used for access 

management, but the commenter 

maintained that does not mean that one 

substitutes for the other. One example 

provided by the commenter is that 

heparin has been used for 30 years as an 

anticoagulant to prevent the blood from 

clotting as it is being filtered through 

the dialyzer and states that the 

substitute for heparin flushing is saline, 

which may be contraindicated in the 

dialysis population due to potential 

blood pressure effects. The commenter 

further stated that alteplase is used as a 

salvage therapy when a catheter 

becomes dysfunctional due to presumed 

thrombosis. The commenter maintained 

that alteplase is the ‘‘only thrombolytic 

currently marketed that can help lyse a 

clot and potentially restore blood flow 

to a poorly functioning catheter’’. The 

commenter included Kidney Dialysis 

Outcomes Quality Initiative (KDOQI) 

guidelines that all catheters are 

‘‘locked’’ with an anticoagulant such as 

heparin to prevent thrombosis. The 

commenter provided the physiological 

response to the heparin which they state 

could result in thrombus formation and 

further stated that the guidelines 

recommend thrombolytic therapy 

directed at salvaging the catheter before 

access replacement. The commenter 

cited the pharmacological and 

indication differences between the two 

drugs, as well as potential quality 

problems that they believe will occur 

with the proposed change Finally, the 

commenter distinguished between 

heparin and alteplase by indicating that 

patient care technicians (PCTs) 

administer intravenous heparin while 

alteplase is prescribed by a physician 

and cannot be administered by PCTs. 

Response: We did not state in the 

proposed rule that alteplase was 

sometimes used off-label in the dialysis 

setting; however, we believe that the 

commenter may be referring to our 

statement that ESRD facilities routinely 

used thrombolytic drugs for access 

management purposes. 

In the development of the ESRD PPS, 

we knew that alteplase and heparin 

were pharmacologically different (that 

is, one is a thrombolytic lysing clots and 

the other is an anticoagulant preventing 

clots, respectively). However, we 

believe that both drugs enable the 

catheter or graft to function either 

through clot prevention or clot 

degradation and provide effective 

dialysis vascular access. We are aware 

that heparins and thrombolytics have a 

different mode of action, with heparin 

preventing thrombosis and 

thrombolytics lysing a thrombus after it 

has formed. We are also aware that 

formation of a thrombus in or around 

the tip of central venous catheters used 

for dialysis is one reason for catheter 

dysfunction. Appropriate use of heparin 

by dialysis facilities can prevent 

thrombus formation, thus reducing the 

likelihood of catheter dysfunction. 

Heparin use in dialysis has long been 

part of the ESRD composite payment 

system, is relatively inexpensive, and is 

widely used as an effective technique 

for primary prevention of hemodialysis 

catheter dysfunction. Thrombolytics 

(including alteplase), can be used to lyse 

or dissolve thrombus, restoring catheter 

function in some cases. These agents are 

very costly and, according to FDA 

package insert information, can result in 

significant bleeding complications. 

From the perspective of achieving a 

clinical result, maintenance of 

hemodialysis catheter function, either 

inexpensive primary prevention or 

costly intervention produces 

interchangeable results. We believe that 

payment policy should encourage 

achievement of the desired results in the 

most cost-effective manner, particularly 

when the prevention approach reduces 

risk to Medicare beneficiaries. We 

believe that the significant expenditures 

for thrombolytics suggests that there are 

ESRD facilities that may not be 

adequately applying established 

preventive methods (that is, use of 

heparin) to maintain hemodialysis 

catheter access. Inclusion of 

thrombolytics in the definition of outlier 

services and potentially making a 

facility eligible for outlier payments 

supports the continuation of this 

practice. 

As for the statement about negative 

outcomes, we believe maintaining 

vascular access is a renal dialysis 

service and therefore, is included in the 

ESRD PPS. ESRD facilities are 

responsible for furnishing the service. 

We expect that ESRD facilities would 

not refer patients to another healthcare 

setting for the purpose of maintaining 

vascular access. We expect patients to 

be referred to another setting if 

medically necessary. We are not 

suggesting that ESRD facilities are 

expected to address any and all vascular 

complications, if doing so would be 

unsafe for the patient. Finally, as we 

indicated, we plan to monitor whether 

ESRD facilities are continuing to 

maintain vascular access as they 

currently perform. 

With regard to the comment on the 

disincentive to use alteplase properly, 

as we noted above, payment policy is 

not intended to dictate, determine, or 

influence clinical practice. We believe 

that the policy that any drug or 

biological used for access management 

would not be considered eligible under 

the outlier policy (that is, excluding 

thrombolytics from the outlier policy), 

would support decision-making based 

on medical need and not based upon 

financial incentives. We believe that 

continuing to recognize expensive 

thrombolytics as outlier services for 

purposes of computing outlier payments 

for ESRD facilities could create perverse 

financial incentives to underutilize clot 

prevention techniques and overutilize 

clot lysis techniques in the course of 

vascular access maintenance by ESRD 

facilities. 

The commenter is correct that 

Medicare Benefit Policy Manual, Pub. 

100–02, chapter 11, section 30.4.1, does 

not explicitly list alteplase or other 

thrombolytics as composite rate drugs; 

however, it does state that drugs used as 

a substitute for any of the listed 

composite items or are used to 

accomplish the same effect (that is, 

access patency) are covered under the 

composite rate. As we explained in 

previous responses, we believe that 

alteplase and other thrombolytic drugs 

are used for access management as is 

heparin, though we acknowledge that 

the physiological action is different. As 

we explained above, we based our 

decision to propose the elimination of 

thrombolytic drugs from outlier 

eligibility because both thrombolytics 

and anticoagulants are used to maintain 

the patency of the dialysis access site. 

We note that, at this point, we are not 

aware of another ESRD-related drug 

category which has some drugs covered 

under the composite while others in the 

category are separately billable. 

For example, for the category of bone 

and mineral metabolism, there are 

various drugs that can be used. These 

drugs have the same outcome, but have 

different physiological actions to 

accomplish bone integrity; some are 

calcium or calcium analogues while 

others are phosphorus. The difference in 

the bone and mineral metabolism 

category is that all of the drugs were 

separately billable and therefore, 

eligible under the outlier policy. 

Another example is antihypertensives. 

There are many antihypertensive drugs 

which have the same clinical effect of 

lowering blood pressure, but how the 

effect is achieved differs. Beta blockers 

by blocking beta adrenergic receptors 

slow the heart rate and thereby reduce 

the force in which the heart muscle 

contracts leading to a decrease in blood 

pressure. Hydrochorothiazide increases 

the amount of water removed from the 


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blood, causing a decrease in blood 

pressure. Ace inhibitors prevent the 

conversion of ACE I and ACE II. ACE II 

causes the blood vessels to constrict. By 

preventing the conversion, the blood 

vessels dilate and lead to a decrease in 

blood pressure. Antihypertensives are in 

the composite rate. 

The commenter is also correct that the 

Medicare Benefit Policy Manual, Pub. 

100–02, chapter 11, section 30.4.2 does 

list thrombolytics for declotting central 

venous catheters as being separately 

paid. We cannot address why this 

payment distinction was made under 

the composite rate payment system. 

However, we do not believe that 

allowing some drugs in a drug category 

(that is, for access management) to be 

eligible under the outlier policy while 

other drugs in the category are not is 

sound payment policy. Because a drug 

was paid separately under the 

composite rate system does not mean 

that it has to be eligible under the 

outlier policy under the ESRD PPS. We 

are not saying that thrombolytics should 

or should not be used as their use is a 

medical determination. We are merely 

saying that as a result of classifying 

drugs and biologicals into categories (for 

example, access management), 

thrombolytics would no longer be 

eligible under the outlier policy 

beginning January 1, 2012. 

As we discussed earlier and in the CY 

2011 ESRD PPS final rule (76 FR 49050), 

under the ESRD PPS, we did not 

provide a specific ESRD-related drug list 

because we recognized that drugs and 

biologicals change over time. That is the 

reason that we categorized drugs and 

biologicals based on function, such as 

access management. In that regard, 

heparin (and other clot prevention 

drugs) and thrombolytics such as 

alteplase, despite their pharmacological 

differences, are all categorized as access 

management drugs.). Because there may 

be other drugs and biologicals that may 

be used for access management in the 

future that may also have different 

physiological differences, we also stated 

that any drug or biological furnished for 

the purpose of access management will 

be considered a renal dialysis service 

under the ESRD PPS. In other words, 

even if a new drug has a physiological 

action that differs from anticoagulants 

(as heparin) or thrombolytics (as 

alteplase), but is used to maintain access 

patency, we would not consider such 

drug to be eligible under the outlier 

policy. 

We disagree with the commenter’s 

argument that patient care techs (PCTs) 

can administer heparin as part of 

standing orders while alteplase is 

prescribed by a physician implies that 

they should not be considered in the 

same category. We believe that any 

medication or any protocol used for 

dialysis is prescribed by a medical 

practitioner and that differences in who 

may administer a drug is not an 

appropriate distinction that should 

impact CMS payment determinations.. 

We are monitoring access management 

and will continue to do so. 

We have not been convinced by the 

commenters that we should not 

implement the policy to exclude 

thrombolytic drugs from the outlier 

policy. Therefore, in this final rule, we 

are finalizing our policy to exclude 

thrombolytic drugs from the outlier 

policy and have recomputed the outlier 

MAP amounts to reflect this policy 

change. However, because we did not 

propose to exclude separate payment of 

thrombolytic drugs under the composite 

rate portion of the blended payment, 

separate payment will be made for 

thrombolytic drugs under the composite 

rate portion of the blended payment in 

CY 2012. 

Comment: One national organization 

opposed the inclusion of testosterone 

and anabolic steroids in the anemia 

management category citing that it is not 

recognized as the standard of care. The 

commenter indicated that the 

forthcoming Kidney Disease: Improving 

Global Outcomes (KDIGO) Clinical 

Practice Guidelines for Anemia and 

CKD makes a strong (level 1B) 

recommendation that testosterone and 

anabolic steroids not be used. The 

commenter further states that the use of 

these drugs is not the recognized 

standard of care and the KDIGO 

guidelines would discourage the 

financial incentives associated with 

their use. 

Response: We appreciate the concerns 

expressed by the commenter. The 

determination to include drugs in or 

exclude drugs from a category is made 

based on the overall effect of the drug. 

Standards of care and appropriate use of 

any item or service is not within the 

scope of payment policy. As we have 

indicated in responses to comments 

above, we expect that ESRD facilities 

will make decisions based on patient 

need and appropriateness of the items 

and services they furnish. That means 

we would not expect that a drug would 

be furnished for financial purposes but 

rather that the drug is medically 

necessary for the patient. We expect that 

medical practitioners will make 

prescribing decisions based on 

appropriate medical decision making. 

Finally, we believe that the renal 

community will work towards achieving 

the best medical practice. Nonetheless, 

we determined that such drugs were 

included in the 2007 claims (though the 

dollar amount was small) and as a 

result, proposed to modify the outlier 

policy. 

Therefore, in this final rule, we are 

finalizing a policy to include 

testosterone and anabolic steroids that 

are used for anemia management as 

eligible outlier services and have 

recomputed the outlier MAP amounts to 

reflect this policy change. 

b. Exclusion of Automated MultiChannel Chemistry (AMCC) Laboratory 

Tests From the Outlier Calculation 

Medicare regulations at § 413.237 

provide that ESRD-related laboratory 

tests that were or would have been 

considered separately billable under 

Medicare part B prior to January 1, 

2011, are eligible outlier services. Those 

laboratory tests were specified in 

Attachment 3 of Change request 7064 

issued under Transmittal 2033, as 

modified by Transmittals 2094 and 

2134. In the CY 2011 ESRD PPS final 

rule (75 FR 49135 through 49138), we 

indicated that in order to compute the 

outlier payment for laboratory tests, the 

50 percent rule is required. In addition, 

because the 50 percent rule is necessary 

to calculate the composite rate portion 

of the blended payment during the 

transition period, we retained the 50 

percent rule to determine whether 

Automated Multi-Channel Chemistry 

(AMCC) panel tests would be 

considered composite rate or separately 

billable for the ESRD PPS portion of the 

blended payment (75 FR 49137). The 

AMCC panel tests and an explanation of 

the 50 percent rule are identified in Pub. 

100–2, chapter 11, section 30.2.2. ESRD 

laboratory billing rules can be found in 

Pub. 100.04, chapter 16, section 40.6. 

The 50 percent rule provides that if 50 

percent or more of covered laboratory 

tests comprising a panel of AMCC tests 

are included under the composite rate 

payment, then all submitted tests are 

included within the composite rate 

payment and, therefore, none of the 

laboratory tests are considered 

separately billable. Conversely, if less 

than 50 percent of the covered panel 

tests are composite rate tests, then all 

AMCC tests submitted for the date of 

service for that beneficiary are 

considered separately billable. In 

addition, Pub. 100–2, chapter 8, section 

60.1 provides that an AMCC test that is 

a composite rate test, but is furnished 

beyond the normal frequency covered 

under the composite rate, is separately 

billable based on medical necessity. 

We explained in the CY 2012 ESRD 

PPS proposed rule (76 FR 40514 and 

40515), that after publication of the CY 

2011 ESRD PPS final rule, we received 


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numerous requests to eliminate the 50 

percent rule due to the commenters’ 

assertions that they were confused about 

its application. Unlike specific drugs 

which are classified as either composite 

rate or separately billable for purposes 

of eligibility under the outlier policy as 

discussed above, AMCC laboratory tests 

may be classified as either composite 

rate or separately billable depending 

upon the application of the 50 percent 

rule or the frequency at which the 

laboratory test is ordered. Therefore, the 

determination of ESRD-related 

laboratory tests as eligible outlier 

services depends upon the number of 

panel tests furnished or their 

subsequent classification based on the 

application of the 50 percent rule. 

Because the AMCC laboratory tests 

included as eligible under the outlier 

policy are determined by the 50 percent 

rule, and in the interests of 

administrative simplification and 

minimizing confusion, we proposed to 

eliminate use of the 50 percent rule for 

the outlier policy and exclude the 23 

AMCC laboratory tests from the 

definition of ESRD outlier services and 

from the computation of outlier 

payments. We proposed that the 

elimination of the 50 percent rule for 

the AMCC panel tests under the ESRD 

PPS outlier payment policy would 

result in the de facto treatment of those 

tests as composite rate tests. 

Accordingly, we proposed to revise 

§ 413.237(a)(1)(ii) of the regulations to 

exclude these laboratory tests from the 

definition of ESRD outlier services. The 

50 percent rule would continue to 

apply, however, to AMCC laboratory 

tests for classification as either 

composite rate or separately billable for 

the purpose of computing the composite 

rate portion of the blended rate for 

ESRD facilities that elected to receive 

payments under the transition, because 

the transition period under the ESRD 

PPS would be time limited, and would 

expire when the transition period ends. 

This would occur because all in 2014 

ESRD payments would be based 100 

percent on the ESRD PPS and there 

would no longer be a need to maintain 

the distinction between composite rate 

and separately billable laboratory 

services for purposes of applying the 50 

percent rule. The comments we received 

and our responses are set forth below: 

Comment: Two commenters 

expressed support of the elimination of 

the 50 percent rule under the outlier 

policy. One renal dialysis organization 

welcomed the elimination of the 50 

percent rule. However, the commenter 

indicated that, of the 23 AMCC tests, 

twelve were part of the composite rate 

prior to January 1, 2011. The commenter 

believes that the other eleven tests 

should not be considered part of the 

composite rate as they are not routinely 

performed for evaluation of ESRD. The 

commenter further explained that it is 

rare to see all eleven tests ordered on 

one patient. 

Response: We thank the commenters 

for their support of our proposal to 

eliminate the 50 percent rule under the 

outlier policy. As we discussed in the 

proposed rule (76 FR 40514 through 

40515), all 23 laboratory tests were 

included on the outlier list for the 

purpose of the 50 percent rule only. 

Under our proposal to eliminate the 50 

percent rule from the outlier policy, the 

twelve composite rate laboratory tests in 

the AMCC panel would no longer be 

considered eligible under the outlier 

policy. Of the remaining 11 laboratory 

tests in the AMCC panel, the majority 

would not be considered ESRD related. 

Therefore, these tests are not eligible 

under the outlier policy. 

Because we did not propose to alter 

that policy with regard to the composite 

rate portion of the blended payment and 

the policy was only discussed in the 

context of the outlier policy, we do not 

believe it would be appropriate to make 

the change at this time. Therefore, in CY 

2012, we are retaining the 50 percent 

rule and the 23 AMCC laboratory tests 

for the composite rate portion of the 

blended payment during the transition, 

because the transition period under the 

ESRD PPS would be time limited, and 

will expire when the transition period 

ends. 

In the preamble of the proposed rule 

(76 FR 40515), we proposed to revise 

§ 413.237(a)(1)(ii) of the regulations to 

exclude these laboratory tests from the 

definition of ESRD outlier services. 

However, in the proposed regulation 

text of the proposed rule (76 FR 40550), 

we proposed revisions to § 413.237 by 

adding paragraph (a)(1)(v) to exclude 

these laboratory tests from the definition 

of outlier services. In this final rule, we 

are finalizing our proposal, but are 

finalizing the revision of § 413.237 by 

adding paragraph (a)(1)(v) to indicate 

that as of January 1, 2012, the laboratory 

tests that comprise the AMCC panel are 

excluded from the definition of outlier 

services. 

c. Impact of Final Changes to the Outlier 

Policy 

In the proposed rule (76 FR 40515 and 

40516), we showed the impact of the 

proposed changes in the outlier policy 

which were to: (1) Exclude vascular 

access management drugs and include 

anabolic steroids as eligible outlier 

service drugs; and (2) exclude the 23 

AMCC laboratory tests from the ESRD 

outlier services definition. In this final 

rule, we are finalizing the revised ESRD 

outlier services definition and changes 

to the outlier policy. The outlier 

services MAP amounts and fixed dollar 

loss amounts included in the proposed 

rule were based on 2009 data. In this 

final rule, we are updating the outlier 

services MAP amounts and fixed dollar 

loss amounts based on 2010 data. The 

impact of this update is shown in Table 

2, which compares the outlier services 

MAP amounts and fixed dollar loss 

amounts in the proposed rule with the 

updated estimates for this final rule. All 

estimates in Table 2 were inflation 

adjusted to reflect projected 2012 prices 

for outlier services. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

Based on the use of updated data for 

2010, the average outlier services MAP 

per treatment amounts have decreased 

from $87.83 to $81.73 for adult patients 

and slightly from $46.27 to $46.26 for 

pediatric patients. These updates largely 

reflect changes in the utilization of 

outlier services for adult and pediatric 

patients between 2009 and 2010. These 

changes result in a smaller outlier 

services MAP amount for adult patients 

(decrease from $83.73 to $78.00) and 

very little change in the outlier services 

MAP amount for pediatric patients. 

Similarly, the fixed dollar loss 

amounts which are added to the 

predicted MAP amounts per treatment 

to determine the outlier thresholds are 

being updated from $145.25 to $141.21 

for adult patients and from $82.58 to 

$71.64 for pediatric patients. We 

estimate that the percentage of facilities 

with patient months qualifying for 

outlier payments under the current 

policy will be slightly lower for adult 

patients (from 5.5 to 5.4 percent) and 

higher for pediatric patients (from 5.0 to 

5.7 percent) based on our use of 2010 

data. 

The update based on 2010 data has a 

somewhat greater impact on the outlier 

policy for pediatric patients compared 

to adult patients. There is generally 

greater sensitivity in the pediatric 

results due to the relatively small 

number of pediatric Medicare dialysis 

patients overall (approximately 800 

patients nationally). This is especially 

the case with the pediatric fixed dollar 

loss amounts, since the magnitude of 

the pediatric fixed dollar loss amounts 

is basically determined by a relatively 

small number of the highest cost 

pediatric patients. The somewhat lower 

pediatric fixed dollar loss amounts 

based on data from 2010 (as compared 

with 2009), reflect the tendency to have 

somewhat less extreme high cost cases 

for pediatric patients in the 2010 claims. 

The expected result based on this 

update is that a somewhat larger 

percentage of pediatric claims are 

expected to qualify for outlier payments 


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based on 2010 data, but the average 

outlier payment among the pediatric 

outlier cases will be somewhat lower. 

D. Technical Corrections 

1. Training Add-On 

In the CY 2011 ESRD PPS final rule 

(75 FR 49062 through 49063), we 

explained the rationale for costs 

associated with self-dialysis training. 

On page 49063 of the CY 2011 ESRD 

PPS final rule, the correct training addon amount of $33.44 is listed in our 

response in column. However, we 

inadvertently listed an incorrect training 

add-on amount of $33.38 in the third 

column of page 49063. The correct 

training add-on amount is $33.44. 

Therefore, we are correcting the training 

add-on amount to $33.44 in the third 

column on page 49063 of the CY 2011 

ESRD PPS final rule, for costs associated 

with self-dialysis training on or after 

January 1, 2011. The geographic wage 

index is applied to the $33.44. As 

described in the CY 2011 ESRD PPS 

final rule (75 FR 49063), the training 

add-on amounts after application of the 

wage index would range from $20.03 to 

$45.84. 

Although we did not propose any 

changes to the current training add-on 

(other than noting the technical 

correction), we received 12 comments 

from patients and a home training 

organization. The comments we 

received and our responses are set forth 

below: 

Comment: Two commenters 

supported the technical correction to 

the training add-on amount. Some 

comments recommended changes to the 

training add-on which included 

updating the training add-on to keep 

pace with inflation by applying the 

update directly to the training add-on or 

by re-calculating the hourly nurses time 

using the methodology employed in the 

CY 2011 ESRD PPS final rule. One 

commenter stated that the training addon is outside of the bundled base rate 

and therefore, is not captured in the 

annual market basket update. One home 

training organization stated that they 

were disappointed with home training 

reimbursement. The commenter also 

indicated that the allowable home 

training payments cannot be billed 

because of issues with the submission 

requirements for the ESRD Medical 

Evidence form for new patients. A home 

training organization, patients, families 

and a national association believe that 

training treatments should be paid at the 

prescribed frequency and not limited to 

three days per week, up to the allowable 

number of days. One commenter 

maintained that her clinic was losing 

money on training and therefore their 

time should be compensated 

appropriately. Another commenter 

believes that the home training add-on 

adjustment did not come close to 

capturing the costs of training. Several 

commenters maintained that training 

should be for more than one hour of 

nursing time. Several commenters 

believe that the training add-on 

adjustment is inadequate. 

Response: As we indicated in the 

proposed rule (75 FR 40516), we were 

providing a technical correction to note 

the correct amount of $33.44 for training 

treatments furnished on or after January 

1, 2011. We did not propose any change 

in the methodology or the training addon adjustment. Thus, the suggestions 

and comments received are beyond the 

scope of this final rule. However, we 

will take these comments into account 

in future rulemaking. Also note, the 

training add-on adjustment is adjusted 

by geographic wage index to account for 

a nurse’s salary for one-hour of home 

dialysis training. This adjustment 

applies to both hemodialysis and 

peritoneal dialysis home training and is 

paid in addition to the ESRD PPS 

payment. That is, ESRD facilities receive 

a per-treatment payment, that accounts 

for case-mix, geographic location, lowvolume and outlier payments, regardless 

if the patient receives dialysis at home 

or in a facility, plus the training add-on. 

We also note that staff time is included 

in the per treatment payment amount 

and, the training add-on is in addition 

to that amount. 

2. ESRD-Related Laboratory Test 

In the proposed rule (76 FR 40516), 

we noted that we inadvertently omitted 

an ESRD-related laboratory test from 

Table F: ESRD-Related Laboratory Tests 

of the Appendix in the CY 2011 ESRD 

PPS final rule. We explained that the 

‘‘Assay of protein by other source,’’ 

which is identified by the Current 

Procedural Terminology code 84157, 

was a composite rate service under the 

basic case-mix adjusted composite 

payment system and, consequently, is 

considered a renal dialysis service 

under the ESRD PPS effective January 1, 

2011. Therefore, the ‘‘Assay of protein 

by other source’’ should be furnished by 

the ESRD facility, either directly or 

under arrangement by another entity, to 

the ESRD patient and paid for under the 

ESRD PPS payment. 

We did not receive any comments. In 

this final rule, we are correcting Table 

F of CY 2011 ESRD PPS final rule by 

adding, ‘‘Assay of protein by other 

source’’ identified by the Current 

Procedural Terminology code 84157. 

E. Clarifications to the CY 2011 ESRD 

PPS 

1. ICD–9–CM Diagnosis Codes 

In the proposed rule, we discussed 

the ICD–9–CM diagnosis codes that are 

eligible for the co-morbidity payment 

adjustments (76 FR 40516). We 

provided the list of ICD–9–CM codes 

that are recognized for purposes of the 

co-morbidity payment adjustments in 

Table E: ICD–9–CM Codes Recognized 

for a Co-morbidity Payment Adjustment 

of the Appendix of the CY 2011 ESRD 

PPS final rule (75 FR 49211). Although 

we discussed ICD–9–CM coding to be 

used to identify co-morbidity conditions 

on ESRD claims, we did not indicate 

that we would update the existing 

diagnostic categories and ICD–9–CM 

codes on an annual basis. 

We clarified that the ICD–9–CM codes 

are subject to the annual ICD–9–CM 

coding changes that occur in the 

hospital inpatient PPS final rule and 

effective October 1st of every year (76 

FR 40516). We explained that any 

changes that affect the categories of comorbidities and the diagnoses within 

the co-morbidity categories that are 

eligible for the co-morbidity payment 

adjustments will be communicated to 

ESRD facilities through sub-regulatory 

guidance. In the proposed rule, we also 

explained that in response to comments 

we have received, we believed that it 

was important to reiterate the 

discussion of co-morbidities that was 

detailed in the CY 2011 ESRD PPS final 

rule (75 FR 49094 through 49107). 

Therefore, we explained that ESRD 

facilities should continue to provide 

documentation in the patient’s medical/ 

clinical record to support any diagnosis 

recognized for a payment adjustment, 

because this is a requirement to receive 

the co-morbidity payment adjustment. 

As we discussed in the proposed rule, 

we have been and will continue to 

monitor the prevalence of any comorbidity diagnoses recognized for the 

co-morbidity payment adjustments 

under the ESRD PPS as compared to the 

prevalence of these categories over the 

past several years. Therefore, we would 

be able to identify any changes in the 

prevalence of any of the co-morbidity 

diagnoses recognized for purposes of the 

co-morbidity payment adjustment as 

compared to previous trends. We are 

monitoring the co-morbidities eligible 

for payment adjustment to determine if 

the co-morbidity adjustments need to be 

refined in future rulemaking. We did 

not receive any comments on this 

clarification. 


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2. Emergency Services to ESRD 

Beneficiaries 

In the CY 2011 ESRD PPS final rule 

(75 FR 49056), we explained that 

inpatient services, emergency services, 

and outpatient services furnished in a 

hospital or in an ambulatory surgical 

center furnished to ESRD beneficiaries 

were not included in the ESRD PPS base 

rate, and none of these services are 

considered renal dialysis services for 

inclusion in the ESRD PPS payment 

bundle. These services are reimbursed 

under other Medicare payment systems. 

We also explained that certain 

outpatient procedures necessary to 

maintain vascular access (that is, those 

which cannot be addressed by the ESRD 

facilities using procedures that are 

considered part of routine vascular 

access care), are excluded from the 

definition of renal dialysis services and 

are not included in the ESRD PPS 

payment. However, we consider the 

furnishing of certain medications, such 

as those used to flush a vascular access 

site of an ESRD patient, to fall within 

the definition of renal dialysis services. 

As we discussed in the section on 

consolidated billing rules and edits in 

the CY 2011 ESRD PPS final rule (75 FR 

49168), the ESRD PPS payment is an allinclusive payment for renal dialysis 

services and the ESRD facility is 

responsible for all of the ESRD-related 

services that a patient receives. Payment 

for renal dialysis services under the 

ESRD PPS, including those that were 

formerly paid separately under the basic 

case-mix adjusted composite payment 

system, is no longer made to entities 

other than the ESRD facility (such as 

laboratories and DME suppliers). 

In the proposed rule (76 FR 40517), 

we noted that after the publication of 

the CY 2011 ESRD PPS final rule, we 

received requests that we further clarify 

whether certain renal dialysis services 

furnished in an emergency room or 

emergency department are considered 

renal dialysis services covered under 

the ESRD PPS. Accordingly, we further 

clarified that renal dialysis services 

defined at § 413.171 of the regulations 

include diagnostic laboratory tests. In 

developing the ESRD PPS base rate, we 

included payments for outpatient 

laboratory tests billed on ESRD facility 

claims, as well as laboratory tests 

ordered by monthly capitation payment 

(MCP) physicians and billed on carrier 

claims (75 FR 49055), because we 

believe that these diagnostic laboratory 

tests furnished by ESRD facilities and 

MCPs meet the definition of renal 

dialysis services. We did not include 

laboratory tests ordered for Medicare 

ESRD patients undergoing treatment in 

hospital emergency departments or 

emergency rooms, because these tests 

are usually administered as part of a 

patient’s clinical assessment of the 

condition requiring emergency room 

admission, which we believe are not 

generally related to the treatment of 

ESRD. Therefore, laboratory tests that 

are performed for Medicare ESRD 

beneficiaries in an emergency situation 

in an emergency room or emergency 

department as part of the general workup of the patient, were excluded from 

the ESRD PPS payment bundle, and 

would not be considered renal dialysis 

services under the ESRD PPS. 

We acknowledged in the proposed 

rule that laboratory tests that could be 

used during dialysis and ordered for the 

treatment of ESRD also may be ordered 

for ESRD patients in an emergency 

department or emergency room for other 

reasons (that is, as part of the 

assessment of the patient to obtain a 

diagnosis of the underlying condition 

which required emergency 

intervention). Although such tests could 

also be used in dialysis treatment and in 

the treatment of ESRD, because 

laboratory tests ordered for ESRD 

patients treated in emergency 

departments or emergency rooms are 

needed to arrive at a diagnosis of the 

condition requiring emergency 

treatment, we did not consider the 

laboratory tests as renal dialysis services 

under the ESRD PPS. Accordingly, these 

laboratory tests were not used to 

develop the ESRD base rate. We 

indicated that we would not expect that 

the laboratory tests provided in that 

circumstance to be subject to 

consolidated billing edits, resulting in 

denial of payment. That is, we would 

not consider such tests to be renal 

dialysis services in those emergency 

situation because they were not ordered 

for the treatment of ESRD, but instead, 

furnished as part of the general work-up 

of the patient necessary for diagnosis. 

We further explained in the proposed 

rule that the exclusion of laboratory 

tests ordered in hospital emergency 

rooms or emergency departments from 

the consolidated billing edits did not 

mean that renal dialysis facilities should 

attempt to circumvent the application of 

the bundled ESRD PPS rate by directing 

patients to emergency rooms or 

emergency departments for obtaining 

ESRD-related laboratory tests, or the 

provision of other renal dialysis 

services. Because ESRD facilities are 

financially responsible for all renal 

dialysis laboratory tests, referring ESRD 

patients to the emergency room or 

emergency department for ESRD-related 

laboratory tests would be inappropriate. 

We noted that it would also be 

inappropriate for ESRD facilities to refer 

its patients to the emergency room or 

emergency department for maintenance 

of access sites (including treatment for 

access infections) which they had 

treated prior to the ESRD PPS for the 

purpose of diverting costs of providing 

renal dialysis services to their patients, 

or the administration of drugs that are 

considered renal dialysis services under 

the ESRD PPS. We also stated that we 

are monitoring the provision of renal 

dialysis services to ESRD patients in 

emergency rooms or emergency 

departments. 

We did not solicit comments on 

emergency services to ESRD 

beneficiaries; however, we received four 

comments from national organizations. 

A summary of the comments we 

received and our responses to comments 

are set forth below. 

Comment: Several commenters 

representing hospital organizations 

endorsed CMS’ policy not to apply the 

consolidated billing rules to items and 

services furnished to ESRD patients in 

hospital emergency rooms or emergency 

departments for reasons other than the 

treatment of ESRD. One commenter 

supported CMS’s recognition that the 

ESRD PPS consolidated billing rules do 

not apply to patients in the emergency 

department. One commenter supported 

the exclusion of services provided in an 

emergency room from the definition of 

renal dialysis services under the ESRD 

PPS. One commenter appreciated the 

clarification that’’‘‘legitimate’’ nonESRD laboratory tests in emergency 

rooms, hospitals, and ambulatory care 

centers are not part of the ESRD PPS. 

Another commenter agreed that hospital 

emergency department claims are 

excluded from the ESRD consolidated 

billing edits. The commenter suggested 

modeling specific guidance from the 

skilled nursing facility (SNF) 

consolidated billing guidance. The 

commenter believed that that 

medication administration should not 

be included in the ESRD PPS 

consolidated billing stating that the 

administration of medications other 

than EPO or Aranesp would be directly 

related to the emergency condition. The 

commenter stated that the application of 

the AY modifier is a huge operational 

burden for hospitals and often they are 

unaware that patients have ESRD. 

Response: We thank the commenters 

who supported our clarification of 

consolidated billing under the ESRD 

PPS. However, some commenters have 

misunderstood our clarification. In the 

proposed rule (76 FR 40517), we 

explained that we understood that 

laboratory tests that could be used for 

dialysis could also be ordered for ESRD 


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patients in an emergency room or 

emergency department for reasons other 

than the treatment of ESRD in order to 

arrive at a diagnosis. We stated that we 

recognize that laboratory tests ordered 

for ESRD patients in emergency room or 

emergency department that are needed 

to arrive at a diagnosis would not be 

considered renal dialysis services under 

the ESRD PPS and, therefore, would not 

be subject to consolidated billing. We 

further explained that the exclusion of 

laboratory tests that are ordered in an 

emergency room or emergency 

department and excluded from 

consolidated billing edits does not mean 

that renal dialysis facilities should 

attempt to circumvent the ESRD PPS 

bundled payment rate by directing 

patients to the emergency room or 

emergency department for ESRD-related 

laboratory tests. 

We have not included drugs or any 

other renal dialysis item or service in 

the consolidated billing rule exemptions 

when furnished in an emergency room 

or emergency department. In other 

words, the only services that we have 

excluded from the consolidated billing 

edits are laboratory tests that are 

performed in an emergency room or 

emergency department to determine a 

diagnosis. We are not discussing any 

other outpatient setting other than an 

emergency room or emergency 

department. We will consider the 

inclusion of renal dialysis drugs (that is, 

drugs used for ESRD-related conditions) 

furnished in the emergency room or 

emergency department exemption in 

future rulemaking. 

With regards to the suggestion that we 

follow the SNF consolidated billing 

guidelines, we will be issuing guidance 

on the consolidated billing exemption of 

laboratory tests ordered in an emergency 

room or emergency department for the 

purpose of establishing a diagnosis. 

Finally, with regard to the comment on 

the burden of using an AY modifier for 

non-ESRD-related items and services, 

we believe it is important that we assure 

that duplicate payments are not being 

made for items and services that have 

been included in the ESRD PPS bundled 

payment. At the current time, the use of 

the AY modifier is the only means that 

can be used in order to clearly identify 

items and services that are not ESRDrelated. 

F. Miscellaneous Comments 

Comment: One commenter expressed 

disappointment that CMS did not 

remind ESRD facilities of the November 

1, 2011 deadline to elect to be excluded 

from the transition. 

Response: We believe that the 

decision to receive a blended payment 

under the transition or to receive 

payment under the ESRD PPS was a 

very important business decision for 

ESRD facilities and that a reminder was 

not necessary. 

Comment: One national association 

urged CMS to consider the concerns of 

facilities in the transition and make 

adjustments to the proposed rule when 

it may impact their financial viability 

and ability to provide quality patient 

care. 

Response: We always assess the 

degree to which our proposed policies 

negatively impact categories of ESRD 

facilities such as rural, independent, 

pediatric, and transitioning ESRD 

facilities and are committed to 

developing payment policies that are 

fair and lead to increased payment 

accuracy under the ESRD PPS. 

Comment: One independent ESRD 

facility did not believe that ESRD 

facilities should be held to the one-time 

election if changes are made annually. 

The commenter proposed that the onetime election be made on an annual 

basis or for those facilities that will be 

‘‘disproportionately negatively 

impacted’’ by the proposed changes. 

The commenter further stated that the 

ability to rescind decisions made in 

2010 should be made available. 

Response: Section 1881(b)(14)(E)(ii) of 

the Act prohibits us from allowing 

facilities to submit annual elections or 

to rescind elections. Therefore, we are 

unable to allow changes to the election 

under any circumstance. With regard to 

annual changes to the ESRD PPS, we 

did not state that CMS would not make 

any changes to the composite rate 

portion of the blended payment or to the 

ESRD PPS. We believe there are changes 

finalized in this rule (such as 

eliminating a site of service distinction 

with regard to separate payment for 

antibiotics used for access infection and, 

eliminating the 50 percent rule under 

the outlier policy) that will result in 

positive effects to transitioning 

facilities. 

Comment: One patient organization 

stated that bundling has already 

negatively impacted patients. The 

commenter further states that providers 

have in large part changed prescribed 

medications to the detriment of patients. 

The commenter cited changing practices 

of providing analog vitamin D and iron 

as examples. 

Response: We are concerned about the 

comments made by this organization. 

We expect that ESRD facilities through 

their interdisciplinary teams and 

through the patient’s nephrologist will 

ensure that patients receive the care that 

they require. We are monitoring many 

aspects of the ESRD PPS, including 

outcomes. We encourage patients to 

contact their ESRD Network if they are 

concerned about the care that they are 

receiving from their ESRD facilities. 

Comment: Several commenters 

requested that the rate-setting and 

impact files at the provider level be 

provided to allow for transparency. The 

commenters indicated that they did not 

have the data to evaluate the proposed 

rule and offer suggestions to improve 

the bundled system. One commenter 

cited the need for the rate-setting file to 

allow for evaluating the proposed 

changes to the low-volume adjuster. The 

commenter further stated that their 

findings differed from CMS and 

expressed concern that CMS may have 

overestimated the low-volume adjuster 

in the standardization calculation 

leading to funds being taken out of the 

payment system inappropriately. One 

dialysis organization expressed their 

concern that small providers may not 

have the resources to identify outliers 

and place them on claims. The 

commenter urged CMS to show data 

that outlier payments were helping 

small providers. The commenter further 

stated that if small providers were not 

receiving outlier payments, then it may 

be best for funds allocated for outliers 

be made part of the base rate. One 

commenter stated that they remain 

concerned that some proposed policies 

continue to result in a loss of funds from 

the ESRD program that exceeds the 

Congressionally-mandated two percent 

for CY 2011. 

Response: We do not agree with the 

assertions that CMS provided 

inadequate data to evaluate and 

comment on the proposals described in 

the proposed rule. We believe that the 

discussions and explanations in the 

proposed rule are sufficiently detailed 

to provide an adequate explanation as to 

how values were computed. In addition, 

we posted a provider-level impact file 

on the ESRD Payment Web site which 

was used to create the proposed impact 

analysis. We acknowledge that we may 

not have provided sufficient notification 

that the files were available and, 

therefore, in the future, we plan to 

provide a listserv notification to inform 

stakeholders when these files are 

available on the ESRD Payment Web 

site. As we did for CY 2011, we will 

post the provider-level file that will 

allow further analysis of the impact of 

the final outlier and wage index changes 

for CY 2012 on individual providers. 

We have not made the rate setting file 

available because the release of patient 

identifiable data is not necessary to 

accomplish the purpose of analyzing 

our proposals. Applicable Federal 

privacy laws and regulations, including 


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the Privacy Act and HIPAA Privacy 

Rule only permit us to disclose personal 

identifiable information when it is 

necessary to administer the program, or 

for health care operations and payment. 

We believe that some of the concerns 

raised by the commenters are related to 

the assumptions we made in computing 

the final base rate for CY 2011 where we 

standardized the base rate to account for 

the projected payments for the ESRD 

PPS adjustments. These concerns are 

beyond the scope of this final rule. 

With regard to the commenters’ 

claims that we had overstated the lowvolume adjustment in the 

standardization calculation leading to 

funds being inappropriately taken out of 

the payment system, we explained the 

low volume methodology in great detail 

in the CY 2011 ESRD PPS proposed rule 

(74 FR 49969 through 49978) and in the 

CY 2011 ESRD PPS final rule (75 FR 

49117 through 49125). We did not 

propose to change or modify the lowvolume adjuster methodology for CY 

2012. We note that we are monitoring 

the extent to which the low-volume and 

other ESRD PPS adjustments are 

consistent with the assumptions we 

made in developing the ESRD PPS. We 

will address this issue in future 

rulemaking. 

We do not understand the comment 

that suggested that the proposed 

policies continue to result in a loss of 

funds from the ESRD program that 

exceeds the Congressionally-mandated 

two percent, because the two-percent 

reduction only applied to CY 2011. 

Comment: Some commenters 

provided comments on issues that were 

not addressed in the proposed rule. 

These are summarized as follows. Some 

commenters suggested that the extra 

costs associated with patient noncompliance should be addressed. Some 

commenters advocated for inclusion of 

their products in the ESRD bundled 

payment. Other commenters believed 

that there should be a new technology 

adjustor and provided suggestions such 

as including new pharmaceutical agents 

into the base rate; providing for 

incremental payments for innovations 

that improve clinical outcomes, but do 

not reduce costs to dialysis facilities 

immediately; and a non-budget-neutral 

pass-through for new technology. One 

commenter suggested that we include 

over-the-counter nutritional support in 

the PPS as of January 1, 2012. Several 

commenters maintained that oral drugs 

for long term residents with ESRD 

should be dispensed by the Long Term 

Care pharmacy. Several commenters 

declared that CMS provide a statement 

indicating that future updates to items 

and services in the bundle will be made 

through rulemaking rather than 

guidance and, requested that CMS 

specify how future changes to the 

system will be handled. One commenter 

supported a race/ethnicity adjuster and 

provided their rationale on its inclusion. 

Another commenter urged CMS to 

examine time on machine, nutritional 

services, social work services and 

nursing services. One commenter 

requested that CMS explore broader 

ESRD bundles, such as integrated care 

models. Several commenters expressed 

difficulty of documenting comorbidities and suggested that CMS 

provide the adjusters to the providers. 

Finally, some commenters expressed 

concerns about the ESRD cost report 

and with the anticipated funding of 

oral-only drugs. 

Response: Because these comments 

were not in response to any proposals 

or discussions in the proposed rule, 

they are beyond the scope of this final 

rule. However, we refer the commenters 

to the CY 2011 ESRD PPS final rule 

where we believe that we addressed 

many of these issues (75 FR 49030). We 

also note that we will review all of the 

comments and may address them in 

future rulemaking. 

Comment: One individual commenter 

supported the proposed rule. One 

national association supported the casemix adjusted PPS. Another national 

association expressed their pleasure 

with the way in which CMS has 

implemented the first year of the ESRD 

PPS and the agency’s willingness to 

work with the ESRD community. 

Response: We thank the commenters 

for their support and willingness to 

work with CMS in implementing the 

ESRD PPS. 

II. End-Stage Renal Disease Quality 

Incentive Program for Payment Years 

(PYs) 2013 and 2014 

A. Background for the End-Stage Renal 

Disease Quality Incentive Program for 

PY 2013 and PY 2014 

For over 30 years, monitoring the 

quality of care provided to end-stage 

renal disease (ESRD) patients and 

provider/facility accountability have 

been important components of the 

Medicare ESRD payment system. The 

ESRD Quality Incentive Program (QIP), 

required by section 1881(h) of the Social 

Security Act (the Act), is the next step 

in the evolution of the ESRD quality 

program that began more than three 

decades ago. The first year for which the 

ESRD QIP payment reduction will be 

implemented is PY 2012. The PY 2012 

ESRD QIP was finalized in two 

regulations: one that finalized the three 

performance measures (75 FR 49030, 

49182 (August 12, 2010) (hereinafter 

referred to as the ‘‘CY 2011 ESRD PPS 

final rule’’)); and one that finalized 

other aspects of the 2012 ESRD QIP 

such as the scoring methodology and 

payment reduction scale (76 FR 628 

through 646) (hereinafter referred to as 

the ‘‘2012 ESRD QIP final rule’’). 

Section 1881(h) of the Act, as added by 

section 153(c) of MIPPA, generally 

requires that the Secretary establish an 

ESRD QIP by (i) Selecting measures; (ii) 

establishing the performance standards 

that apply to the individual measures; 

(iii) specifying a performance period 

with respect to a year; (iv) developing a 

methodology for assessing the total 

performance of each provider/facility 

based on the performance standards 

with respect to the measures for a 

performance period; and (v) applying an 

appropriate payment reduction to 

providers and facilities that do not meet 

or exceed the established Total 

Performance Score. 

As we have stated, the first year for 

which the ESRD QIP payment reduction 

will be implemented is PY 2012, and we 

selected one measure for the PY 2012 

ESRD QIP of dialysis adequacy and two 

measures of anemia management. The 

following are the three measures 

(finalized in the CY 2011 ESRD PPS 

final rule) for the PY 2012 ESRD QIP: 

• Percentage of Medicare patients 

with an average hemoglobin less than 

10.0 g/dL (Hemoglobin Less Than 10 g/ 

dL measure). 

• Percentage of Medicare patients 

with an average hemoglobin greater than 

12.0 g/dL (Hemoglobin Greater Than 12 

g/dL measure). 

• Percentage of Medicare patients 

with an average urea reduction ratio 

(URR) equal to or greater than 65 

percent (URR Hemodialysis Adequacy 

measure). 

A full description of the 

methodologies used for the calculation 

of the measures can be reviewed at: 

http://www.dialysisreports.org/pdf/esrd/ 

public/Guide_to_the_PY_2012_

ESRD_QIP_PSR.pdf (see the ‘‘Inclusion 

Criteria’’ and ‘‘Calculation Process’’ 

sections of the document). 

Other aspects of the 2012 ESRD QIP 

finalized in the PY 2012 ESRD QIP final 

rule include the establishment of 

performance standards for these 

measures (including applying the 

special rule under section 1881(h)(4)(E) 

of the Act) and establishing a scoring 

methodology for calculating individual 

Total Performance Scores ranging from 

0–30 points based on the three finalized 

measures. As part of our methodology 

for calculating the provider/facility 

Total Performance Score, we weighted 

the Hemoglobin Less Than 10 g/dL 


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1 KDOQI Clinical Practice Guideline and Clinical 

Practice Recommendations for Anemia in Chronic 

Kidney Disease: 2007 Update of Hemoglobin Target, 

American Journal of Kidney Diseases, 50(3): Pages 

471–530 (September 2007). 

Measure at 50 percent of the score, 

while the Hemoglobin Greater Than 12 

g/dl measure and the URR Hemodialysis 

Adequacy measure were each weighted 

at 25 percent of the score. We also 

finalized a policy under which 

providers/facilities that did not meet or 

exceed a Total Performance Score of 26 

points would receive a payment 

reduction ranging from 0.5 percent to 

2.0 percent. 

B. Summary of the Proposed Provisions 

and Responses to Comments on the 

End-Stage Renal Disease (ESRD) Quality 

Incentive Program (QIP) for PY 2013 

and PY 2014 

On July 8, 2011, a proposed rule 

entitled ‘‘Medicare Program; Changes to 

the End-Stage Renal Disease Prospective 

Payment System for CY 2012, End-Stage 

Renal Disease Quality Incentive 

Program for PY 2013 and PY 2014; 

Ambulance Fee Schedule; and Durable 

Medical Equipment’’ (76 FR 40498) (the 

‘‘proposed rule’’) appeared in the 

Federal Register. In the proposed rule, 

we expanded upon the PY 2012 ESRD 

QIP framework by proposing to adopt 

new ESRD QIP requirements for PYs 

2013 and 2014. 

We received approximately 88 public 

comments on the proposed rule that 

were related to the ESRD QIP. Interested 

parties that submitted comments 

included dialysis facilities, national 

organizations representing dialysis 

facilities, nephrologists, nurses, 

nutritionists, home health agencies, 

dialysis corporations, clinical 

laboratories, pharmaceutical 

manufacturers, hospitals and their 

representatives, individual dialysis 

patients, advocacy groups, and the 

Medicare Payment Advisory 

Commission (MedPAC). In this section 

of the final rule, we provide a summary 

of each proposed requirement for the PY 

2013 and PY 2014 ESRD QIP, a 

summary of the public comments 

received on those requirements, our 

responses to these comments, and the 

final policies that will apply to the PY 

2013 and the PY 2014 ESRD QIP. 

1. PY 2013 ESRD QIP Requirements 

In the proposed rule, we outlined the 

proposed requirements for the two 

proposed measures for the PY 2013 

ESRD QIP. We proposed that ESRD 

providers and facilities that do not meet 

these requirements would receive a 

reduction, based on their Total 

Performance Score, to the payments 

otherwise made under section 

1881(b)(14) with respect to PY 2013 

services, in accordance with section 

1881(h)(1)(A) of the Act. We proposed 

to calculate these payment reductions 

by assigning each provider/facility a 

Total Performance Score, ranging from 

0–30 points, in accordance with its 

individual performance on the two 

proposed measures. We proposed that a 

provider/facility that does not achieve a 

Total Performance Score of 30 points 

would receive a payment reduction in 

PY 2013 ranging from 1.0 percent to 2.0 

percent, depending upon how far below 

this minimum Total Performance Score 

its performance falls. Our specific 

proposals, responses to comments, and 

finalized policies based on comments, 

are discussed below. 

a. Performance Measures for the PY 

2013 ESRD QIP 

Section 1881(h)(2)(A) of the Act 

requires that the measures specified for 

the ESRD QIP include measures on 

anemia management that reflect the 

labeling approved by the FDA for such 

management; measures on dialysis 

adequacy; to the extent feasible, a 

measure or measures on patient 

satisfaction; and such other measures 

that the Secretary specifies, including 

(to the extent feasible) measures on iron 

management, bone mineral metabolism, 

and vascular access, including 

maximizing the placement of arterial 

venous fistula. In selecting measures for 

the PY 2013 ESRD QIP, we examined 

whether it would be feasible to propose 

to adopt any new measures for the 

program. In light of our proposal to 

select CY 2011 as the performance 

period (discussed more fully below), we 

determined that it is not feasible to 

adopt any of the new measures 

mentioned above until the PY 2014 

ESRD QIP. We also carefully 

reexamined the three measures that we 

adopted for the PY 2012 ESRD QIP, and 

for the reasons discussed below, 

proposed to continue including only 

two of them, (i) The Hemoglobin Greater 

Than 12 g/dL measure and (ii) the URR 

Hemodialysis Adequacy measure, in the 

PY 2013 ESRD QIP measure set. 

We also proposed to retire the 

Hemoglobin Less Than 10 g/dL measure 

beginning with the PY 2013 ESRD QIP. 

As we explained in more detail in the 

proposed rule (76 FR 40519), we have 

recently reassessed the evidence for the 

use of erythropoiesis stimulating agents 

(ESAs) in patients with kidney disease 

through a National Coverage Analysis 

(CAG–00413N) and, while we did not 

seek to limit the coverage of these agents 

at this time, we could not identify a 

specific hemoglobin lower bound level 

that has been proven safe for all patients 

treated with ESAs. In addition we 

believe that retiring the Hemoglobin 

Less Than 10 g/dL measure is reflective 

of the new labeling approved by the 

FDA for the use of ESAs (http:// 

www.fda.gov/Drugs/DrugSafety/ 

ucm259639.htm). We discussed with 

the FDA our proposal to retire the 

Hemoglobin Greater Than 10 g/dL 

measure starting in PY 2013. Because 

this measure encourages providers/ 

facilities to keep hemoglobin above 10 

g/dL, the FDA agreed that retiring this 

measure is consistent with the new 

labeling for ESAs approved by the FDA. 

We proposed to maintain the 

Hemoglobin Greater Than 12g/dL 

measure as a measure of anemia 

management. As we explained in more 

detail in the proposed rule (76 FR 

40519), the studies continue to show 

that targeting hemoglobin levels above 

12 g/dL through the use of ESAs can 

contribute to adverse patient outcomes.1

This measure, consistent with the 

requirement under section 

1881(h)(2)(A)(i) of the Act, also 

continues to reflect the labeling 

approved by the FDA for anemia 

management. 

We also proposed to retain the URR 

Hemodialysis Adequacy measure, 

which assesses the percentage of 

Medicare patients with an average URR 

equal to or greater than 65 percent. 

Section 1881(h)(2)(A)(i) of the Act states 

that the measures specified under the 

ESRD QIP for a payment year shall 

include measures on dialysis adequacy. 

We noted that, for the reasons stated in 

the CY 2011 ESRD PPS final rule (75 FR 

49182), we believe that the URR 

Hemodialysis Adequacy measure is an 

appropriate and accurate measure of 

hemodialysis adequacy. 

The comments we received on these 

proposals and our responses are set 

forth below. The comments on and the 

responses to the Hemoglobin Greater 

Than 12 g/dL measure also apply to the 

proposal to include this measure in the 

PY 2014 ESRD QIP. 

Comment: Many commenters urged 

CMS to retire the URR Hemodialysis 

Adequacy measure for PY 2013 in favor 

of a Kt/V measure because Kt/V is 

widely accepted, is used extensively by 

the renal community as a measure of 

dialysis adequacy, and is the basis for a 

measure endorsed by the National 

Quality Forum (NQF). One commenter 

specifically noted that there are 

situations in which patients may have a 

Kt/V within an acceptable range, but not 

a URR equal to or greater than 65 

percent. One commenter suggested that, 

if CMS does retire the URR dialysis 

adequacy measure for the PY 2013 


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ESRD QIP, the agency should consider 

allowing facilities to report either URR 

or Kt/V. 

Response: We thank the commenters 

for their input on this issue. We agree 

that a Kt/V dialysis adequacy measure 

would more accurately measure how 

much urea is removed during dialysis 

because the calculation takes into 

account the amount of urea removed 

with excess fluid. We asked providers/ 

facilities to begin submitting Kt/V data 

on July 1, 2010, and plan to incorporate 

measure(s) based on Kt/V as soon as we 

can to ensure the validity and 

consistency of these data. In the interim, 

for the reasons stated in the CY 2011 

ESRD PPS final rule (75 FR 49182), we 

believe that the URR Hemodialysis 

Adequacy measure is, overall, an 

appropriate and accurate measure of 

hemodialysis adequacy. 

Comment: Many commenters voiced 

concern over CMS’ proposal to retire the 

Hemoglobin Less Than 10 g/dL 

measure. One commenter specifically 

stated that CMS should consider the 

effects of retiring this measure on 

pediatric patients. Commenters noted 

that without a lower bound for 

hemoglobin in the ESRD QIP, the 

bundled payment system financially 

incentivizes providers/facilities to 

provide less ESAs, driving hemoglobin 

down. Commenters argued that 

decreased hemoglobin will lead to a rise 

in transfusions, hospitalization, 

morbidity, and mortality, endanger 

vascular access due to the need for 

additional venipuncture, and decrease 

quality of life, appetite of patients, and 

consistency of care, shifting care to 

hospitals and outpatient infusion 

centers. Further, one commenter argued 

that dropping the hemoglobin floor will 

increase the burden of ESRD patients 

because, as a result of the negative 

consequences, it will require more 

appointments and travel to receive 

transfusions; another commenter stated 

that retiring the measure will have a 

‘‘chilling effect’’ on the ability to pursue 

innovation in the treatment of patients 

with chronic kidney disease (CKD). 

Commenters also noted that a rise in 

transfusions could result in worse 

transplant outcomes and a higher 

likelihood of infection. They also argued 

that quality of life issues may cause 

individuals to be less active and eat less 

nutritious foods, possibly resulting in 

patients who are less healthy and need 

more care. Some commenters noted that 

many of these consequences would be 

disproportionately suffered by the 

African-American community and 

encouraged CMS to collect and analyze 

data on health disparities. 

Response: We thank commenters for 

their input. As we stated in the 

proposed rule (76 FR 40519), we have 

recently reassessed the evidence for the 

use of ESAs in patients with kidney 

disease through a National Coverage 

Analysis (CAG–00413N), and we could 

not identify a specific hemoglobin lower 

bound level that has been proven safe 

for all patients treated with ESAs. We 

are also not aware of, nor did the 

comments note, any studies that 

identify a specific hemoglobin level 

which should be maintained to increase 

quality of life or minimize transfusions 

or hospitalizations. However, if any new 

evidence or studies emerge, we will take 

such evidence into consideration in 

adopting future measures for the ESRD 

QIP. We have discussed our proposal to 

retire the Hemoglobin Less Than 10 g/ 

dL measure with the FDA and they 

concur that retiring the measure is 

consistent with the new labeling for 

ESAs. Factors that impact anemia 

management, including optimal iron 

stores, dialysis adequacy, avoidance of 

infections, reduction of inflammation, 

and other factors should be addressed 

by the health care team to improve 

patient health. We urge patients and 

providers to work together to achieve 

optimal hemoglobin levels for each 

individual patient. We will continue to 

monitor and evaluate practice patterns 

and outcomes for all segments of the 

Medicare ESRD population as we 

develop and refine our measurement of 

the quality of anemia management. 

Additionally, we note that pediatric 

patients are excluded from the anemia 

management measures we have thus far 

adopted and are adopting in this final 

rule for the ESRD QIP, so the retirement 

of this measure does not directly affect 

the pediatric population. 

Comment: As an alternative to retiring 

the measure, some commenters argued 

that CMS should reduce the lower 

bound from 10 g/dL to 9 g/dL or 8 g/ 

dL or decrease the financial penalty. 

Commenters also suggested that the 

measure not be limited to those on ESAs 

because there are other means of 

maintaining hemoglobin levels. Other 

commenters suggested that the root 

cause of health issues related to high 

hemoglobin is the overuse of ESAs, and, 

therefore, CMS should create an anemia 

management measure monitoring ESA 

usage or other outcomes such as 

transfusion avoidance rather than 

hemoglobin levels. One commenter 

recommended that CMS set a range for 

hemoglobin of 10–11 g/dL, and, if a 

patient’s hemoglobin is higher than 11 

g/dL, CMS should require the ESA 

dosage to be decreased and not 

discontinued. One commenter proposed 

that, in the event the Hemoglobin Less 

Than 10 g/dL measure remains in the 

ESRD QIP, the weighting for this 

measure be decreased until an accurate 

baseline is determined reflecting current 

medical evidence and drug labeling. 

One commenter suggested that this 

weighting decrease to zero. Commenters 

also asked CMS to continue to monitor 

hemoglobin levels, perhaps through a 

reporting measure or as a condition for 

coverage, and publicly report low 

hemoglobin levels even if the measure 

is retired from the ESRD QIP. 

Response: As we noted above, we did 

not find scientific evidence to identify 

an appropriate and safe quality standard 

for a minimal achieved hemoglobin 

level. Therefore, in the absence of this 

evidence, we do not believe it is 

appropriate to simply decrease the 

lower bound. Additionally, continuing 

to employ the measure in the program, 

but decreasing its weight to zero may 

signal to beneficiaries that this measure 

is valid, although less important, and 

that it is, therefore based in scientific 

evidence. As noted above, we are 

actively monitoring trends in anemia 

management as well as patient 

outcomes, and we strongly encourage 

patients and providers to work together 

to develop anemia management 

strategies appropriate for individual 

patient circumstances. We note that the 

Hemoglobin Less Than 10 g/dL measure 

results are currently reported on 

Dialysis Facility Compare, and that we 

are exploring the options and feasibility 

of continuing to publicly report anemia 

management trends. 

We agree with commenters that we 

should consider anemia management 

measures that apply to patients not on 

ESAs, and, under 42 CFR 494.180(h), we 

asked providers/facilities to begin 

providing data for these patients on 

January 1, 2012. In addition, we are 

considering ways to incorporate 

achieved hemoglobin levels, ESA usage, 

and other important factors in our 

anemia measurement strategy for future 

years of the ESRD QIP; we welcome 

community input and would like to 

encourage measure development in this 

area. 

Comment: Some commenters agreed 

with our proposal to retire the 

Hemoglobin Less Than 10 g/dL 

measure. Commenters noted that such a 

proposal reflects the new labeling 

approved by the FDA for the use of 

ESAs, is consistent with the lack of 

scientific evidence for a lower bound, 

and will allow providers more latitude, 

providing room for more patientcentered care. Several commenters also 

suggested that, while CMS should retire 


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the measure, the agency should also 

conduct additional clinical studies to 

establish optimal dose strategies, targets, 

and the long term safety of various ESA 

therapies, and reinstate a lower bound 

as soon as possible. 

Response: We thank commenters for 

their support. As we noted above, we 

will continue to monitor practice 

patterns in the area of anemia 

management and develop and evaluate 

additional measures for future years of 

the ESRD QIP. We will also continue to 

work with our Federal partners and 

external stakeholders to advance 

knowledge in this area. 

Comment: One commenter suggested 

that the agency include text in the ESRD 

QIP certificates to be posted in 

December 2011 to acknowledge the 

changing guidance in anemia 

management so patients and caregivers 

are aware that the data are dated and not 

necessarily relevant in today’s 

environment. Another commenter stated 

that CMS should develop Performance 

Score Report (PSR) mechanisms to 

adjust for unusual patient demographics 

and dialysis facility census. 

Response: The PY 2012 ESRD QIP 

certificates will clearly state that ‘‘the 

information communicated * * * is 

based on 2010 data.’’ Our regulations do 

not preclude providers/facilities from 

providing patients with more 

explanatory detail, and we encourage 

providers/facilities to engage patients in 

discussions of this information. 

As we have stated, we continue to 

monitor the effects of the ESRD QIP on 

all segments of the Medicare ESRD 

population, and we will continue to 

evaluate our scoring and public 

reporting methodology for any 

necessary modifications. 

Comment: Some comments suggested 

that the Hemoglobin Greater Than 12 g/ 

dL measure should be retired from the 

PY 2013 and PY 2014 ESRD QIP 

measure set because some patients may 

benefit from a higher hemoglobin level 

and there is a lack of scientific evidence 

for an upper hemoglobin bound. 

Commenters argued that, generally, 

higher hemoglobin leads to better 

quality of life and patients and doctors 

should be able to weigh risks and 

benefits, leading to a more patientcentered definition of quality. These 

commenters noted that CMS should 

only be regulating those providers/ 

facilities that are clear outliers. Some 

commenters requested that, should CMS 

retain the measure, the bound be raised 

to Greater Than 12.5 or Greater Than 13 

g/dL. Another commenter stated that, 

given recent clinical practice changes 

already addressing the concern for high 

hemoglobin and high ESA doses, it may 

be reasonable for CMS to decrease the 

weighting for the Hemoglobin Greater 

Than 12 g/dL measure. 

Response: Studies continue to show 

that targeting hemoglobin levels above 

12 g/dL through the use of ESAs can 

contribute to adverse patient outcomes 

including an increased risk of 

myocardial infarction, stroke, venous 

thromboembolism, thrombosis of 

vascular access, and overall mortality, 

and, in patients with a history of cancer, 

tumor progression or recurrence. Given 

the significance of these outcomes, we 

do not believe it is appropriate either to 

retire the measure or reduce the weight 

of the measure. In addition, as 

explained further below, this measure is 

consistent with new labeling for ESAs 

approved by the FDA that directs 

providers to reduce or interrupt the dose 

of ESAs if the hemoglobin level 

approaches or exceeds 11 g/dL. 

Comment: Some commenters argued 

that the only anemia management 

measure should be Hemoglobin Greater 

Than 11 g/dL, replicating the FDA 

guidelines. Commenters suggested that 

such a measure is consistent with 

current scientific evidence, provides the 

best level of care for patients, and 

lowers Medicare costs. 

Response: New labeling approved by 

the FDA for the use of ESAs addresses 

targeted hemoglobin levels while we 

measure achieved hemoglobin levels. 

The achieved hemoglobin level is a 

function of the target but also reflects 

patient factors such as the underlying 

causes of anemia which determine how 

sensitive the patient is to ESAs and 

whether the target is actually achieved. 

These patient factors can vary 

unpredictably over time even within an 

individual patient which means that 

patients will sometime exceed (or fall 

short of) the hemoglobin level target 

despite clinician diligence. The FDA 

label recognizes this hemoglobin 

variability and states that, if the 

hemoglobin approaches or exceeds 11 

g/dL, ESA dosing should be reduced or 

interrupted, but the label does not state 

that hemoglobin levels should never 

exceed this value. We believe that the 

current anemia measure allows for some 

deviations of the achieved hemoglobin 

while highlighting that higher 

hemoglobin targets can result in adverse 

patient outcomes. 

Comment: Some commenters 

supported the Hemoglobin Greater Than 

12 g/dL measure. 

Response: We thank commenters for 

their support. 

Comment: One commenter requested 

clarification on the meaning of ‘‘on 

ESA,’’ and another commenter 

requested that CMS explicitly state that 

the Hemoglobin Greater Than 12 g/dL 

measure applies only to those patients 

on ESAs. Specifically, one commenter 

inquired whether it is applied based on 

one bill indicating ESA administration 

after 90 days of dialysis and the 

submission of four bills for dialysis 

within a 12 month period for adult 

patients. In addition, the commenter 

asked how patients with untreated 

Hemoglobin Greater Than 12 g/dL will 

be identified and excluded from the 

measure calculation. 

Response: We assume that the 

commenters are referring to data 

extracted from claims. As outlined in 

the measure specification, ‘‘on ESA’’ 

means that a patient is receiving ESAs 

during the month covered by a claim, as 

identified by the presence of an ESA 

dose and hemoglobin on the claim. This 

measure applies only to months for 

which a patient has received an ESA 

agent. Patients are attributed to a facility 

only after they have four months of 

eligible claims from that facility. To be 

eligible for the Hemoglobin Greater 

Than 12 g/dL measure, among other 

criteria, (i) The beginning date of the 

claim must have been at least 90 days 

since the date of first ESRD service for 

the patient and (ii) the claim must 

include a line item reporting the 

administration of an ESA in that month. 

These inclusion criteria are unchanged 

from the PY 2012 ESRD QIP. The 

measures specifications are available at 

http://www.dialysisreports.org/ 

ESRDMeasures.aspx. 

Comment: Some commenters believe 

that the Hemoglobin Less Than 10 g/dL 

measure should be retired from the PY 

2012 measure set because it would be 

unfair to penalize dialysis providers/ 

facilities for their nephrologists’ 

interpretation of the medical literature. 

One commenter argued that CMS knew 

of published studies in 2006 and 2009 

which signaled that no lower bound 

could be identified and noted that these 

studies changed behavior in the 

industry. One commenter also stated its 

belief that if CMS does not retire the 

measure for the PY 2012 ESRD QIP, the 

public may erroneously conclude that 

the provider’s/facility’s PY 2012 ESRD 

QIP total performance score reflects CY 

2012 data, as opposed to the data 

utilized for the performance period. 

Commenters also argued that the 

legislative language requiring the 

Secretary to reflect the FDA labeling 

applies to the labeling in the payment 

year rather than the performance year. 

Response: Based on the available 

evidence in 2006 regarding the 

treatment of anemia in the ESRD 

population, we developed a consensusbased measure which was endorsed by 


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the NQF in 2008 (NQF #0370). This 

measure formed the basis for the 

Hemoglobin Less Than 10 g/dl measure 

which was adopted for the ESRD QIP 

(76 FR 628). This measure remained 

consistent with clinical practice 

guidelines and the labeling approved by 

the FDA for the use of ESAs in effect 

until June 2011. In June 2011, new 

labeling for ESAs was approved by the 

FDA. We will retire the Hemoglobin 

Less Than 10 mg/dL measure beginning 

in PY 2013 in accordance with this new 

labeling. 

Although measures are adopted for a 

specific payment year, we evaluate 

performance on those measures during 

a performance period that precedes the 

payment year so that we can collect and 

evaluate the data for these measures and 

allow providers/facilities adequate time 

to review their scores before payment 

reductions occur. Therefore, to the 

extent that the anemia management 

measures under section 1881(h)(2)(A)(i) 

reflect the labeling approved by the FDA 

for such management, we believe that 

those measures must reflect the labeling 

and guidance in effect and the care 

provided during the performance period 

which, with respect to the PY 2012 

program, was CY 2010. 

Finally, as we noted above, the PY 

2012 ESRD QIP certificates state that 

‘‘the information communicated * * * 

is based on 2010 data.’’ 

For the reasons discussed above, for 

the PY 2013 ESRD QIP, we finalize use 

of the following two measures 

previously adopted for the PY 2012 

ESRD QIP: 

• Hemoglobin Greater Than 12g/dL 

measure 

• URR Hemodialysis Adequacy 

measure 

b. Performance Period and Case 

Minimum for the PY 2013 ESRD QIP 

Section 1881(h)(4)(D) of the Act 

requires the Secretary to establish a 

performance period with respect to a 

year, and for that performance period to 

occur prior to the beginning of such 

year. In the proposed rule, we discussed 

in detail the factors that we considered 

in determining what performance 

period to select for the PY 2013 ESRD 

QIP (76 FR 40519). We also noted that, 

in light of the new ESRD PPS, we 

believe that it is important to assess the 

quality of care being furnished to ESRD 

patients and that basing this assessment 

on a year of data will provide an 

accurate and fair determination of 

whether a provider/facility has met or 

exceeded the proposed performance 

standards with respect to the proposed 

measures. Therefore, we proposed to 

select all of CY 2011 as the performance 

period for the PY 2013 ESRD QIP. 

Consistent with what we finalized for 

the PY 2012 ESRD QIP, we also 

proposed to require that providers/ 

facilities have at least 11 cases that meet 

the reporting criteria for a measure in 

order to be scored on the measure. 

The comments we received on these 

proposals and our responses are set 

forth below. 

Comment: Several commenters 

expressed concern that both the PY 

2013 and PY 2014 programs will use 

data more than a year old and penalize 

facilities that have since improved; 

commenters encouraged the use of 

methodologies that recognize changes in 

performance over time and use the most 

recently available data as comparison 

data. Another commenter recommended 

that CMS establish CY 2012 as the 

performance year for PY 2013 because it 

would allow dialysis facilities and 

providers to gauge their performance 

using clinically relevant, timelier, and 

prospective data. 

Response: For both PY 2013 and PY 

2014, we have determined that data 

derived from claims is the most 

appropriate source on which to score 

providers/facilities. Claims data allows 

us to implement a variety of measures 

which can be used to evaluate the 

greatest number of facilities. In order to 

assure completeness of this claims data, 

there is a lag between when the data is 

generated and when we are able to use 

it in the ESRD QIP. This time period is 

lengthened because we believe it is 

important to allow providers/facilities a 

period of time to review their scores 

before the payment period. We are 

considering how we might be able to 

shorten this timeline in the future, such 

as by collecting data through 

CROWNWeb or by some other method, 

such as the NHSN or electronic health 

records, and we will continue to take 

the commenters concerns into account 

as we do so. 

Comment: Several commenters argued 

that, under section 1881(h)(4)(C) of the 

Act, the ESRD QIP performance periods 

must be prospective, but nearly all of 

the PY 2013 performance period will 

have ended by the time the performance 

standards are finalized. Commenters 

also argued that finalizing performance 

standards when the performance period 

is nearly complete impermissibly 

creates a retroactive rule. Comments 

also noted that a retrospective 

performance period does not allow a 

provider/facility to change its practices 

to meet standards, thereby increasing 

quality of care. Other commenters, 

however, voiced support for the 

proposed PY 2013 performance period. 

Response: We acknowledge that 

section 1881(h)(4)(C) of the Act requires 

the Secretary to establish performance 

standards under subparagraph (A) prior 

to the beginning of the performance 

period for the year involved. However, 

we are establishing the performance 

standard that will affect ESRD payments 

in PY 2013 in accordance with section 

1881(h)(4)(E), which does not impose 

the limitation suggested by the 

commenters. We believe that setting a 

CY 2011 performance period for the 

initial ESRD QIP will ensure that the 

performance scores are based on a 

robust set of data, and will allow us 

sufficient time to analyze that data, 

determine whether provider/facilities 

met the performance standards, provide 

providers/facilities with an opportunity 

to preview their performance scores and 

submit related inquiries, and implement 

the applicable payment reductions for 

PY 2013. We also note that, beginning 

with the PY 2014 program, we will set 

performance standards under section 

1881(h)(4)(A) of the Act. 

Comment: Commenters voiced 

concerns about CMS’ approach to 

including low-volume facilities in the 

program because one patient could 

significantly affect a score for reasons 

unrelated to quality of care, such as 

patient comorbidities, and decrease the 

ability of a provider/facility to score 

well on a measure. This scoring could, 

in turn, affect patient volume if 

consumers judge facilities based on 

their scores. Commenters suggested 

different minimum case thresholds such 

as 20 cases or 25 cases or that providers 

with fewer cases be scored differently; 

some commenters also noted that their 

studies showed that the sample size 

rather than overall performance is 

driving the results for facilities and 

requested that CMS raise the case 

minimum to 20. Another commenter 

urged CMS to research the reliability of 

a measure to set the minimum number 

of cases, publish minimum case 

reliability data, and use this data to set 

a minimum number of cases for all 

value-based purchasing programs. One 

commenter urged CMS to re-consider its 

scoring methodology to analyze for 

statistical significance. Another 

commenter stated its belief that the 

ESRD QIP methodology does not 

appropriately account for low patient 

census, unusual treatment setting, or 

patient case-mix, and recommended 

that CMS develop a mechanism to 

adjust for circumstances in which 

facilities with an unusual care setting, 

atypical case-mix, or small patient 

census may be at high risk of incurring 


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penalties for failure to meet 

performance standards. 

Response: We appreciate the 

commenters’ concerns regarding the 

potential impact of patient case mix on 

smaller providers/facilities. The goal of 

the ESRD QIP is to accurately assess the 

quality of care provided by a provider/ 

facility. However, we recognize that a 

quality measure score could be 

impacted by one or more factors 

unrelated to the care furnished by the 

provider/facility, and that the potential 

of such factors to greatly skew the 

calculation decreases as the number of 

cases included in the measure increases. 

Similarly, a provider/facility with a 

small number of patients could find that 

one patient’s outcome determined its 

score on a quality measure. Thus we 

proposed that a provider/facility would 

need to have a minimum of eleven cases 

that meet the eligibility criteria for a 

measure in order to be scored on that 

measure. This eleven case minimum 

allows as many providers/facilities as 

possible to participate in the program. 

This minimum case number is also 

consistent with the reporting of these 

measures on Dialysis Facility Compare. 

We will continue to closely monitor 

beneficiary access to care, including 

evaluating the rate of facility closures. 

We will also continue to assess the 

impact of the program on facilities of all 

sizes, and we will change the 

methodology if we believe it is 

necessary to ensure that the program 

adequately measures quality. 

Additionally, we continue to monitor 

and evaluate the reliability of all of our 

value-based purchasing programs; we 

note, however, that each of these 

programs has its own set of 

requirements which must be considered 

during any assessment of reliability. 

Comment: One commenter expressed 

concern that new facilities without a 

complete data set available for the 

measures will be unfairly penalized. 

Response: Like all ESRD QIP 

providers/facilities, new facilities will 

only be included in the program if they 

have the requisite amount of data. Any 

provider/facility must have adequate 

data to calculate performance rates on 

both PY 2013 measures to be included 

in the PY 2013 ESRD QIP. For each of 

these measures, there must be at least 

eleven cases each with four claims, 

regardless of whether the facility is new 

or established. 

Additionally, under the special rule 

in section 1881(h)(4)(E), we will be 

setting the initial performance standard 

as the lesser of the provider’s/facility’s 

performance during 2007 or the 2009 

national performance rates. If a 

provider/facility was not in existence in 

2007, we will assign a score of zero for 

purposes of assessing which of the two 

standards applies to the provider/ 

facility. The provider/facility’s 

performance in 2011 will then be 

compared against that initial 

performance standard. 

For the reasons discussed above, we 

are finalizing all of CY 2011 as the 

performance period for the PY 2013 

ESRD QIP. 

c. Performance Standards for the PY 

2013 ESRD QIP 

In the proposed rule, we discussed in 

detail what performance standards we 

planned to select for the PY 2013 ESRD 

QIP. We noted that comparing provider/ 

facility performance over time based on 

data from successive years would be 

beneficial as this method would allow 

the public to most accurately gauge 

provider/facility improvement. As we 

discussed above, we also noted that due 

to operational issues, it is not feasible 

for us to establish performance 

standards prior to the beginning of the 

proposed performance period, as is 

required if the performance standards 

are established under section 

1881(h)(4)(A). Therefore, we proposed 

to continue using the performance 

standard under section 1881(h)(4)(E) of 

the Act for the PY 2013 ESRD QIP. 

Under this proposed standard, 

providers/facilities would be evaluated 

based on the lesser of (i) the 

performance of the provider/facility in 

2007, which is the year selected by the 

Secretary under the second section of 

section 1881(b)(14)(A)(ii), or (ii) a 

performance standard based on the 

national performance rates for the 

measures in a period determined by the 

Secretary. With respect to the second 

prong, we proposed selecting CY 2009 

because that is the most recent year-long 

period for which data would be publicly 

available prior to the beginning of the 

proposed performance period. At the 

time we published the proposed rule, 

the 2009 national performance rates for 

the Hemoglobin Greater Than 12 g/dL 

measure and the URR Hemodialysis 

Adequacy measure were: 

• For the Hemoglobin Greater Than 

12g/dL measure: 16 percent. 

• For the URR Hemodialysis 

Adequacy measure: 96 percent. 

The comments we received on the 

proposed selection of this performance 

standard and our responses are set forth 

below. 

Comment: One commenter 

recommended rounding the average 

hemoglobin to one decimal place 

because this method is the industry 

standard and more decimal places 

exaggerates the precision of the 

laboratory tests. One commenter also 

stated that CMS should allow rounding 

to the tenth to address ‘‘between 

instrument variability within a single 

laboratory.’’ 

Response: For Dialysis Facility 

Compare (DFC) and Dialysis Facility 

Reports (DFR), we have traditionally not 

rounded the average patient hemoglobin 

values or the values resulting from the 

hematocrit to hemoglobin conversion. 

The final rule for the first year of the 

ESRD QIP stated that we would 

calculate the hemoglobin measure rates 

as they have been calculated for 

purposes of DFC and DFR in order to 

maintain consistency (76 FR 629). In 

light of this comment, however, we have 

concluded that beginning with the PY 

2013 program, it is reasonable to round 

the patient average hemoglobin value to 

one decimal place to better reflect the 

precision of the original laboratory data 

prior to determining performance on the 

measure. We will also round the 

hematocrit to hemoglobin conversion to 

one decimal place. Using this new 

rounding convention, the 2009 national 

performance rate for the Hemoglobin 

Greater Than 12 g/dL measure using this 

new rounding convention rate is 14 

percent. 

Comment: One commenter suggested 

that CMS use a baseline period of 2009 

for the Hemoglobin Greater Than 12 g/ 

dL measure because data from 2009 is 

the most currently available data. This 

commenter also argued that, because of 

the change in FDA approved labeling 

and guidance from the baseline period 

to the performance period, this measure 

will cause confusion and not accurately 

measure quality and improvement. 

Response: We proposed to use CY 

2009 as the source of data for the 

national comparative performance 

standard for scoring the PY 2013 ESRD 

QIP measures. Although we recognize 

that the FDA-approved label for ESAs 

changed in CY 2011, we note that this 

change did not directly impact this 

measure. The Hemoglobin Greater Than 

12 g/dL measure reflects both the prior 

and new labels for ESAs. 

Comment: One commenter requested 

that CMS employ the PY 2014 

achievement and improvement scoring 

methodology for PY 2013. One 

commenter voiced support for the 

change in methodology to equally 

weight the measures in PY 2013. One 

commenter stated that performance 

standards for PY 2013 should be less 

stringent to decrease the incentive to 

game the system. 

Response: As explained above, we are 

using the special rule for PY 2013. 

Under this standard, providers/facilities 

would be evaluated based on the lesser 


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of (1) The performance of the provider/ 

facility in 2007, which is the year 

selected by the Secretary under the 

second section of section 

1881(b)(14)(A)(ii), or (2) a performance 

standard based on the national 

performance rates for the measures in a 

period determined by the Secretary (for 

PY 2013, this is CY 2009). We do not 

believe that the performance standards 

are too stringent; a provider/facility is 

scored on the lesser of its own 

performance or the national 

performance rate. We will be monitoring 

providers/facilities to assess any 

incentives to game the system. 

After considering the comments, and 

for the reasons stated above, we are 

finalizing following performance 

standards. For the PY 2013 ESRD QIP, 

providers/facilities will be evaluated 

based on the lesser of (i) Their 

individual performance on the measures 

in 2007 or (ii) the national performance 

rates for the measures in 2009. We also 

finalize that we will round the values 

obtained when we convert hematocrit 

values to hemoglobin values and the 

average patient hemoglobin values used 

in the Hemoglobin Greater Than 12 g/ 

dL measure to one decimal place. 

Based on our new rounding 

methodology and the most recent 2009 

data, the 2009 national performance 

rates vary slightly from those in the 

proposed rule. The national 

performance rate in 2009 for the 

Hemoglobin Greater Than 12 g/dL 

measure is 14 percent, and the national 

performance rate in 2009 for the URR 

Hemodialysis Adequacy measure is 97 

percent. 

d. Methodology for Calculating the Total 

Performance Score and Payment 

Reduction for the PY 2013 ESRD QIP 

Section 1881(h)(3)(A)(i) of the Act 

requires the Secretary to develop a 

methodology for assessing the total 

performance of each provider and 

facility based on performance standards 

with respect to the measures selected for 

a performance period. Section 

1881(h)(3)(A)(iii) of the Act states that 

the scoring methodology must include a 

process to weight the performance 

scores with respect to individual 

measures to reflect priorities for quality 

improvement, such as weighting scores 

to ensure that providers/facilities have 

strong incentives to meet or exceed 

anemia management and dialysis 

adequacy performance standards, as 

determined appropriate by the 

Secretary. 

For the PY 2012 ESRD QIP, we 

finalized a scoring methodology under 

which we calculated the performance of 

each provider and facility by assigning 

0–10 points for each measure. The full 

rationale for this scoring methodology is 

presented in detail in the PY 2012 ESRD 

QIP final rule (76 FR 629 through 634). 

For the PY 2013 ESRD QIP, we 

proposed to adopt the same 

methodology for scoring provider/ 

facility performance on each of the 

measures. We noted that, we believe 

that it is important to provide a clearcut method for calculating scores 

initially while providers and facilities 

are becoming familiar with the program. 

We proposed to calculate the 

performance of each provider/facility on 

each measure by assigning points based 

on how well it performed on the 

measure in CY 2011 relative to the 

proposed performance standard 

(discussed above). If a provider or 

facility meets the performance standard 

for a measure, then it would receive 10 

points for that measure. If a provider/ 

facility does not meet the performance 

standard for a measure, we would award 

points for each measure based on a 0 to 

10 point scale and would subtract 2 

points for every 1 percentage point the 

provider or facility’s performance falls 

below the performance standard during 

CY 2011, the performance period for PY 

2013. 

For the PY 2013 ESRD QIP, we 

proposed to weight the Total 

Performance Score for each provider/ 

facility such that 50 percent would 

reflect the Hemoglobin Greater Than 

12g/dL measure and 50 percent would 

reflect the URR Hemodialysis Adequacy 

measure. To be consistent with the 

scoring methodology that we finalized 

for the PY 2012 ESRD QIP, we proposed 

to award up to 30 points to a provider/ 

facility based on its performance on the 

proposed measures. However, because 

we only proposed to adopt two 

measures for the PY 2013 ESRD QIP 

measure set, we proposed to calculate a 

provider’s/facility’s Total Performance 

Score by multiplying each measure 

score (0–10 points) by 1.5, adding both 

measure scores together and rounding 

this number to the nearest integer (with 

0.50 rounded-up), resulting in a 0–30 

point range. 

Section 1881(h)(3)(A)(ii) of the Act 

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution of 

reductions in payments among 

providers and facilities achieving 

different levels of Total Performance 

Scores, with providers and facilities 

achieving the lowest Total Performance 

Scores receiving the largest reductions. 

For the PY 2012 ESRD QIP, we 

implemented a sliding scale of payment 

reductions, setting the minimum Total 

Performance Score that providers/ 

facilities will need to achieve in order 

to avoid a payment reduction at 26 

points (76 FR 634). Providers/facilities 

that score between 21–25 points will 

receive a 0.5 percent payment 

reduction; between 16–20 points, a 1.0 

percent payment reduction; between 

11–15 points, a 1.5 percent payment 

reduction; and for a score between 0–10 

points, providers/facilities will receive 

the full 2.0 percent payment reduction 

(76 FR 634). 

To ensure that providers/facilities are 

properly incentivized to provide quality 

care, we proposed to implement a more 

rigorous sliding scale of payment 

reductions for the PY 2013 ESRD QIP 

and raise the minimum Total 

Performance Score that providers/ 

facilities would need to achieve in order 

to avoid a payment reduction from 26 to 

30 points. We noted that providers/ 

facilities that score between 26–29 

points would receive a 1.0 percent 

payment reduction; between 21–25 

points, a 1.5 percent payment reduction; 

and between 0–20 points, providers/ 

facilities would receive the full 2.0 

percent payment reduction (see Table 3 

below). We believe that applying a 

payment reduction of 2.0 percent to 

providers/facilities whose performance 

falls significantly below the 

performance standards, coupled with 

applying two intermediate payment 

reduction levels to providers/facilities 

based on lesser degrees of performance 

deficiencies, will provide proper 

incentives for all providers/facilities to 

improve the quality of their care. 


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70262 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

The comments we received on this 

proposed scoring, weighting, and 

payment methodologies and our 

responses are set forth below. 

Comment: Several commenters 

expressed concern that the PY 2013 

scoring methodology and resulting 

payment reductions are too aggressive 

and would overly penalize facilities, 

draining them of monetary resources 

and morphing the ESRD QIP into a costcutting program. Several commenters 

suggested either doubling the penalty or 

requiring more points to avoid a 

penalty, but not both, stating that it is 

unreasonable of CMS to expect facilities 

to improve so rapidly from PY 2012 to 

PY 2013. Commenters also argued that 

CMS should reassess its PY 2013 

scoring because nearly all of the 

performance period will have passed 

before the rule is finalized, not allowing 

providers/facilities enough time to make 

the necessary adjustments, and a facility 

that does not meet the performance 

standard for one measure may be 

significantly and unduly penalized 

because the program only evaluates two 

measures. Other commenters noted that 

many other quality programs have a 

broader sliding scale which gives more 

incentive for improvement and 

suggested that the PY 2012 payment 

scale of 0.5–2.0 percent also be used for 

PY 2013. This broader range was also 

suggested because it may take patients 

a period of time to stabilize or larger 

penalties might result from outliers, and 

the penalty structure should be more 

forgiving of these patients. Other 

commenters also stated that, because of 

the change in scoring from PY 2012, 

patients will be unable to compare 

facilities’ scores and note progress. 

Response: We believe that providers/ 

facilities should always be striving to 

improve the quality of care they provide 

to patients. Therefore, we believe it is 

appropriate, in the second year of the 

program, to set a higher standard to 

further encourage improvement. 

Because both of the measures that we 

adopted for the PY 2013 ESRD QIP were 

included in the PY 2012 ESRD QIP 

measure set, we believe that it is 

reasonable to expect providers/facilities 

to have implemented practices to 

improve their performance on these 

measures. Additionally, because we are 

using the special rule, providers/ 

facilities will be evaluated based on the 

lesser of two standards, which should 

help alleviate the concerns expressed by 

the commenters. 

We designed the scoring based on a 

scale similar to what we are using for 

the PY 2012 ESRD QIP to make it easier 

for Medicare beneficiaries to compare 

providers’/facilities’ performance in PY 

2012 and PY 2013. Although we are 

using one less measure and weighting 

the measures differently in PY 2013, we 

believe that Medicare beneficiaries will 

still be able to compare both the overall 

quality of provider/facility performance 

(for example, whether the performance 

improved as a whole from PY 2012 to 

PY 2013), and the degree to which 

provider/facility performance on each of 

the two PY 2013 measures may have 

changed (because the certificates will 

display individual measure scores). 

Comment: Some commenters voiced 

their support for the PY 2013 scoring 

methodology, including the more 

rigorous scale and the equal weighting 

of the PY 2013 measures. 

Response: We thank the commenters 

for their support. For the reasons stated 

above, we are finalizing the proposed 

scoring, weighting, and payment 

methodology for the PY 2013 ESRD QIP. 

2. Proposed PY 2014 ESRD QIP 

a. Proposed Performance Measures for 

the PY 2014 ESRD QIP 

For the PY 2014 ESRD QIP, we 

proposed to continue using the 

Hemoglobin Greater Than 12g/dL 

measure, adopt seven new measures 

(Kt/V Dialysis Adequacy, Vascular 

Access Type (VAT), Vascular Access 

Infections (VAI), Standard 

Hospitalization Ration (SHR)- 

Admissions, National Healthcare and 

Safety Network (NHSN) Dialysis Event 

reporting, Patient Experience of Care 

(ICH CAHPS) reporting, and Mineral 

Metabolism reporting) and to retire the 

URR Hemodialysis Adequacy measure. 

We also proposed to adopt measures 

under section 1881(h)(2)(A)(iii) of the 

Act. In specifying such measures, we 

recognize that section 1881(h)(2)(B)(i) of 

the Act requires that they must have 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act (that entity is currently the NQF) 

unless the exception in clause (ii) 

applies. That provision provides that in 

the case of a specified area or medical 

topic determined appropriate by the 

Secretary for which a feasible and 

practicable measure has not been 

endorsed by the entity with a contract 

under section 1890(a) of the Act, the 

Secretary may specify a measure that is 

not so endorsed as long as due 

consideration is given to measures that 

have been endorsed or adopted by 

consensus organizations identified by 

the Secretary. 

i. Anemia Management Measure 

Section 1881(h)(2)(A)(i) of the Act 

requires that the measures specified for 

the ESRD QIP include measures on 

anemia management that reflect the 

labeling approved by the FDA for such 

management. For the PY 2014 ESRD 

QIP, we proposed to retain the 

Hemoglobin Greater Than 12g/dL 

measure that we adopted for the PY 

2012 ESRD QIP and are finalizing in this 

final rule for the PY 2013 ESRD QIP. We 

made this proposal for the same reasons 

that supported our proposal to retain 

this measure for the PY 2013 ESRD QIP 

measure set. 

The comments we received on this 

proposed measure are discussed above 

in the section discussing the PY 2013 

ESRD QIP. For the reasons stated above, 

we finalize the Hemoglobin Greater 

Than 12 g/dL measure for the PY 2014 

ESRD QIP. The specifications for this 

measure can be found at http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/AnemiaManagementHGB12-2013-2014-FR.pdf. 

ii. Dialysis Adequacy Measure 

Section 1881(h)(2)(A)(i) of the Act 

requires that the ESRD QIP include 

measures on dialysis adequacy. For the 

PY 2014 ESRD QIP, we proposed to 

retire the URR Hemodialysis Adequacy 

measure we adopted for the PY 2012 


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2Note that in the proposed rule, we mistakenly 

referred to this measure as #0250. 

3Note that in the proposed rule, we mistakenly 

referred to this measure as #0321. 

ESRD QIP and are finalizing in this final 

rule to retain for the PY 2013 ESRD QIP. 

In its place, we proposed to adopt a 

measure of dialysis adequacy based on 

Kt/V (K = dialyzer clearance, t = dialysis 

time, and V = volume of distribution) 

for the PY 2014 ESRD QIP. Kt/V has 

been advocated by the renal community 

as a more widely accepted measure of 

dialysis adequacy. Specifically, Kt/V 

more accurately measures how much 

urea is removed during dialysis, 

primarily because the Kt/V calculation 

also takes into account the amount of 

urea removed with excess fluid. Further, 

the proposed measure assesses Kt/V 

levels in both hemodialysis (HD) 

patients (in-center and home (HHD)) 

and peritoneal dialysis (PD) patients, 

and is based on two Kt/V measures of 

dialysis adequacy that have been 

endorsed by the NQF (#0249 2 and 

#0318 3). Specifically, the proposed 

measure assesses the percent of 

Medicare dialysis patients (PD, HD and 

HHD) meeting the modality specific Kt/ 

V threshold. For hemodialysis patients 

(HHD and in-center patients), we 

proposed to measure the percentage of 

adult (≥ 18 years old) Medicare patients 

dialyzing thrice weekly whose average 

delivered dose of hemodialysis 

(calculated from the last measurements 

of the month using the Urea Kinetic 

Modeling (UKM) or Daugirdas II 

formula) was a Kt/V of at least 1.2 

during the proposed performance 

period. For PD patients, we proposed to 

measure the percentage of adult (≥ 18 

years old) Medicare patients whose 

average delivered PD dose was a weekly 

Kt/V urea of at least 1.7 (dialytic + 

residual) during the proposed 

performance period. The specifications 

for the proposed measures exclude 

pediatric patients. The NQF has since 

endorsed a separate pediatric 

hemodialysis adequacy measure 

(#1423), and we are considering how to 

best incorporate this measure into future 

years of the QIP. 

The comments we received on the 

proposed Kt/V measure and our 

responses are set forth below. 

Comment: Several commenters 

expressed concern that providers/ 

facilities use different methodologies to 

calculate Kt/V and asked CMS to 

indicate which methodology should be 

used. Several commenters noted that 

this disparity in formulas and 

specifications may lead to disparate 

baseline standards and requested that 

CMS standardize requirements for Kt/V 

values for performance standards 

instead and/or wait until PY 2015 to 

implement the measure. Some 

commenters asked CMS to acknowledge 

that Daugirdas II or UKM formulas 

should be used for those patients 

receiving thrice weekly hemodialysis 

care. One commenter urged CMS to 

rigorously validate comparison 

calculation methods to assure that if 

different equations are used, they 

provide comparable results for Kt/V. 

Another commenter suggested that it 

would be extremely difficult, if not 

impossible, for the agency to correct the 

lack of standardization in the base year 

and asked instead that CMS take this 

into account in weighting this measure. 

Response: Beginning January 1, 2012, 

we have asked providers and facilities 

to report Kt/V values on claims using 

the Daugirdas II or UKM formulas, 

which are also the formulas specified in 

the NQF-endorsed hemodialysis 

adequacy measures based on Kt/V (CR 

7460). We have also stated that residual 

renal function should be included in the 

peritoneal dialysis Kt/V value but not 

included in the hemodialysis Kt/V 

value. We recognize the commenters’ 

concerns and agree that it would be 

difficult, if not impossible, to create 

accurate, comparable Kt/V measure 

scores for providers/facilities that might 

not have used either the Daugirdas II or 

UKM formula in their Kt/V reporting or 

that may have incorporated residual 

renal function differently. In light of this 

concern, we are not finalizing our 

proposal to adopt the Kt/V dialysis 

adequacy measure for the PY 2014 

ESRD QIP. We intend to propose to 

adopt a Kt/V dialysis adequacy measure 

for future years of the ESRD QIP and 

welcome public input as we proceed 

with this process. 

We recognize that we are required 

under section 1881(h)(2)(A)(i) to include 

measures on dialysis adequacy in the 

ESRD QIP. For this reason, we are also 

not finalizing our proposal to retire the 

URR Hemodialysis Adequacy measure 

for the PY 2014 ESRD QIP and will 

continue to include this measure in the 

PY 2014 measure set. For the reasons 

stated in the CY 2011 ESRD PPS final 

rule (75 FR 49182) we believe that the 

URR Hemodialysis Adequacy measure 

continues to be an appropriate and 

accurate measure of hemodialysis 

adequacy. 

Comment: Many commenters strongly 

supported CMS’ proposal to use Kt/V to 

measure dialysis adequacy beginning 

with the PY 2014 ESRD QIP because it 

is widely accepted, is used extensively 

by the renal community as a measure of 

dialysis adequacy, and is the basis for 

measures endorsed by the NQF. One 

commenter stated a belief that Kt/V is a 

substandard measure as it does not 

adequately reflect the patient’s quality 

of life. One commenter noted that CMS 

should also promote the understanding 

that minimal Kt/V levels may not be 

optimal levels and should develop a 

method for assessing dialysis adequacy 

across all modalities; another 

commenter argued that CMS should use 

the last Kt/V value of the month for each 

patient to calculate the measure rate 

because it is the best clinical indicator 

of the actual dialysis dose delivered to 

a patient during the month. Some 

commenters stated that the measure 

specifications excluding Kt/V values 

exceeding 2.5 for patients receiving 

thrice weekly in-center nocturnal 

hemodialysis may not be appropriate 

because many patients achieve such 

values and asked that this exclusion be 

removed from the measure. Commenters 

also suggested that adjustments should 

be made in the Kt/V measure for short 

daily, more frequent, and nocturnal 

treatments. Commenters asked CMS to 

exclude residual renal function (RRF) 

because it could result in patients being 

under dialyzed, and it carries 

operational burdens such as requiring 

patients to collect urine during a 48- 

hour period. Some commenters, 

however, asked CMS to consider RRF in 

the calculation so that the Kt/V measure 

does not cause over-treatment. One 

commenter asked for clarification of the 

Kt/V specifications in two areas: (i) For 

PD patients, (a) does CMS require that 

facilities report the average of all 

available values for the year; (b) should 

the facilities record Kt/V every 3 or 4 

months; and (c) when should the RRF 

be measured; and (ii) for both HD and 

PD, (a) What are the requirements 

related to urea clearance; and (b) can 

facilities use creatinine clearance as an 

alternative? Although not specific, some 

commenters noted that some of the 

measure specifications were not clear or 

were confusing and asked for 

clarification. One commenter suggested 

that the proposed Kt/V dialysis 

adequacy measure be calculated as the 

average of twelve months Kt/V values in 

an index year. One commenter 

questioned the functionality of 

CROWNWeb to collect Kt/V 

measurements in CY 2012. 

Response: For the reasons stated 

above, we will not finalize this measure 

for the PY 2014 ESRD QIP but we intend 

to propose to adopt a Kt/V dialysis 

adequacy measure for the program as 

soon as possible. We will take the many 

comments regarding the use of Kt/V and 

questions regarding the measure 


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70264 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

4http://www.kidney.org/professionals/kdoqi/ 

guideline_uphd_pd_va/va_guide2.htm. 

5http://www.fistulafirst.org/AboutAVFistulaFirst/ 

History.aspx. 

6See http://www.fistulafirst.org/ for further 

information regarding this initiative. 

specifications into account as we 

develop this future proposal. 

Comment: Some commenters urged 

CMS to develop a dialysis adequacy 

measure for hemodialysis patients who 

dialyze more or less than three times per 

week, either at home or in a clinic. 

Response: We agree with the 

commenter that a dialysis adequacy 

measure for hemodialysis patients who 

dialyze more or less than three times per 

week, either at home or in a clinic, is 

an important quality indicator that 

should be part of the ESRD QIP. At this 

time there is no consensus within the 

ESRD stakeholder community as to 

what the correct formula or target value 

should be for this population. We are 

committed to working with the 

stakeholder community to achieve 

consensus on the correct formulas and 

target values for this population and to 

developing measures for future years of 

the ESRD QIP that accurately assesses 

the adequacy of hemodialysis for this 

population. 

For the reasons stated above, we are 

not finalizing the proposed Kt/V 

Dialysis Adequacy measure for the PY 

2014 ESRD QIP. We are also not 

finalizing our proposal to retire the URR 

Hemodialysis Adequacy measure, but 

are instead finalizing that this measure 

will be included in the PY 2014 ESRD 

QIP. The measure specifications for the 

URR measure can be found at: http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/DialysisAdequacyURR65-2013-2014-FR.pdf. 

iii. Vascular Access Type (VAT) 

Measure 

Section 1881(h)(2)(A)(iii) of the Act 

states, in part, that the measures 

specified for the ESRD QIP shall include 

other measures as the Secretary 

specifies, including, to the extent 

feasible, measures on vascular access, 

including for maximizing the placement 

of arterial venous fistula. For the PY 

2014 ESRD QIP, we proposed to adopt 

a VAT measure. We noted that 

arteriovenous (AV) fistulae are the 

preferred type of vascular access for 

patients on maintenance hemodialysis. 

Because of the lower complication rates 

(including reduced infections), 

decreased risk of patient mortality, and 

greater cost efficiency associated with 

this type of vascular access for eligible 

patients,4, 5 we proposed to adopt a VAT 

measure, based on two measures that 

are endorsed by the NQF. These 

measures assess (i) The percentage of a 

provider’s/facility’s patients on 

hemodialysis using an autogenous AV 

fistula with two needles during the last 

HD treatment of the month (NQF 

#0257); and (ii) the percentage of a 

provider’s/facility’s patients on 

hemodialysis using an intravenous 

catheter during the last HD treatment of 

the month that have had an intravenous 

catheter in use for 90 days or longer 

(NQF #0256). 

While catheter reduction and 

increased use of AV fistula are both 

important steps to improve patient care, 

we recognized that these two events are 

tightly interrelated and do not want to 

penalize providers/facilities twice for 

related outcomes. We therefore 

proposed to combine these two separate 

measures into one measure to contribute 

jointly to the Total Performance Score. 

Because the rates and goals for each 

subcomponent measure are very 

different, we proposed to calculate 

separate measure rates for each measure, 

based on a provider’s/facility’s 

performance on each subcomponent 

measure and to adopt a different 

methodology (discussed below) for 

purposes of setting performance 

standards and scoring providers/ 

facilities on this measure. 

As explained above, section 

1881(h)(2)(B)(i) of the Act requires that, 

unless the exception set forth in section 

1881(h)(2)(B)(ii) of the Act applies, the 

measures specified for the ESRD QIP 

under section 1881(h)(2)(A)(iii) of the 

Act must have been endorsed by the 

entity with a contract under section 

1890(a) of the Act (which is currently 

the NQF). Under the exception set forth 

in section 1881(h)(2)(B)(ii), in the case 

of a specified area or medical topic 

determined appropriate by the Secretary 

for which a feasible and practical 

measure has not been endorsed by the 

entity with a contract under section 

1890(a) of the Act, the Secretary may 

specify a measure that is not so 

endorsed as long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

We stated in the proposed rule that we 

believe that assessing the type of 

vascular access used in hemodialysis 

patients is important because clinical 

evidence has shown that proper 

vascular access reduces the risk of 

adverse outcomes such as infections. 

We also noted that we considered 

proposing to adopt the two NQFendorsed measures noted above (#0256 

and #0257); however, in order to ensure 

that these measures fit the purposes of 

the ESRD QIP, we made modifications 

to these NQF-endorsed measures. 

Accordingly, we proposed to adopt this 

measure under section 1881(h)(2)(B)(ii) 

of the Act. 

We noted in the proposed rule that 

since July 1, 2010, we have asked 

dialysis providers/facilities to submit 

VAT data on ESRD claims (CR 6782). 

We also proposed that hemodialysis 

patients with acute renal failure, 

peritoneal dialysis patients, and patients 

under 18 years of age would be 

excluded from this proposed measure. 

Finally, we stated our belief that 

adoption of this measure would be 

consistent with the efforts of the Fistula 

First initiative, which advances the use 

of fistulas proven to reduce the risk of 

infection/morbidity and mortality.6

The comments we received on this 

proposed measure and our responses are 

set forth below. 

Comment: Many commenters 

supported the proposed VAT measure, 

noting the benefits of AV fistulas and 

the problems with catheters. Many 

commenters also stated that they 

support CMS’ decision to exclude 

hemodialysis patients with acute renal 

failure, PD patients, and patients under 

age 18 from this proposed measure. 

Response: We thank commenters for 

their support. 

Comment: Some commenters 

applauded CMS for proposing to adopt 

a VAT measure but noted certain 

‘‘flaws.’’ Commenters noted that the 

measure (i) ignores grafts, which are 

preferable to catheters and are available 

to some patients who are not candidates 

for fistulas; (ii) is limited to Medicare 

beneficiaries; (iii) could prejudice 

facilities with new patient populations 

who do not yet have a permanent access 

type and those with patients who refuse 

or are not eligible for fistulas, causing an 

access to care issue; and (iv) because of 

the 90 day requirement for the catheter 

measure, will provide less than a year’s 

worth of data on which facilities will be 

evaluated. 

Response: We thank commenters for 

their insights and will address each 

issue in turn. As we have noted 

previously, VAT is critical to patient 

care. Catheters are undesirable due to 

their high rate of complications, such as 

infections, and we discourage their use 

through the proposed catheter 

submeasure. The preferred type of 

vascular access is an AV fistula due to 

lower rates of complications, which we 

promote through the fistula submeasure. 

Although grafts do decrease the risk of 

infections and complications when 

compared to catheters, grafts do not 

decrease these risks as much as fistulae. 

We, therefore, do not believe that grafts 


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7See http://www.dialysisreports.org/pdf/esrd/ 

public-measures/ 

VascularAccess-Fistula-2014-FR.pdf and http:// 

www.dialysisreports.org/pdf/esrd/public-measures/ 

VascularAccess-Catheter-2014-FR.pdf. 

8See http://www.kidney.org/professionals/ 

kdoqi/pdf/12-50-0210_JAG_DCP_ 

Guidelines-VA_Oct06_SectionC_ofC.pdf; 

http://www.qualityforum.org/WorkArea/ 

linkit.aspx?LinkIdentifier=id...67692. 

9For example, if one patient was treated every 

month, his/her claim inputs would account for 

twelve, individual inputs for calculating the 

measure rate. Whereas a patient that is only seen 

for four months would be counted as four inputs. 

are either beneficial enough to be 

specifically rewarded or harmful 

enough to be specifically penalized. 

We agree that it would be beneficial 

to measure vascular access type for all 

ESRD patients, but, at this time, we are 

unable to collect the needed data 

through Medicare claims. We believe 

that when CROWNWeb becomes 

available as a data collection vehicle for 

all providers/facilities, we will be able 

to collect data on all patients, and we 

anticipate proposing in future 

rulemaking to change this measure 

when these events occur. We are 

actively monitoring access to care and 

issues associated with ‘‘cherry-picking,’’ 

and it is our intent to engage the 

community as we monitor these issues. 

Finally, we will be able to measure 1 

year of catheter data despite the 90 day 

pre-requisite. The proposed measure 

specifications state that the catheter 

submeasure assesses the percentage of 

hemodialysis patients in whom (i) A 

catheter was in use at the last 

hemodialysis treatment of the month 

and for each of the prior 90 days; and 

(ii) a catheter was the only means of 

vascular access (that is, patient did not 

have an AV fistula or AV graft reported 

at any time during the 90 days).7 The 

measure specifications state that 

patients with a catheter for at least 90 

days will be counted in this measure. 

For example, if a patient was treated at 

a facility for all of October, November, 

and December of 2011 and has a 

catheter for these months, this catheter 

would be counted in January 2012. 

Comment: One commenter 

recommended that CMS: (i) Consider 

developing adjusters for unusual patient 

factors, facility census, and overall casemix to discourage ‘‘cherry-picking’’; and 

(ii) develop a mechanism to more 

effectively engage, and hold 

accountable, vascular surgeons in 

creating successful vascular access. 

Another commenter suggested that the 

measure be modified to only include 

patients with catheters for at least 6 

months. 

Response: We do not agree that only 

those patients who have catheters 6 

months or longer should be included in 

the measure. We note that the proposed 

catheter submeasure is based on an 

NQF-endorsed measure (#0256) which 

includes patients with a catheter longer 

than 90 days.8 It is important to allow 

facility’s some flexibility without 

underplaying the risks associated with 

catheter infections. We believe that 90 

days allows facilities a window of time 

to stabilize patients and obtain a 

functional arteriovenous fistula. We 

appreciate the role that vascular 

surgeons play in obtaining vascular 

access, and we would expect providers/ 

facilities and their staff to work closely 

together to ensure that proper care is 

furnished. We note, however, that the 

ESRD QIP applies only to providers/ 

facilities. 

As we noted above, we are actively 

monitoring access to care and issues 

associated with ‘‘cherry-picking,’’ and 

will consider proposing additional 

policies in future rulemaking should we 

conclude that they would improve the 

overall quality of the ESRD QIP. 

Comment: One commenter suggested 

that CMS develop a measure to monitor 

fistula flow. 

Response: We thank the commenter 

for the suggestion. We continue to work 

on developing measures appropriate for 

the ESRD QIP. 

Comment: One commenter asked for 

clarification of the VAT measure 

specifications, including the following: 

(i) What are the blood flow requirements 

through the AV fistula; (ii) when in the 

month is the access type to be reported; 

and (iii) are Medicare only patients 

counted? The commenter also asked for 

clarification of the following catheter 

submeasure specifications: (i) Are 

Medicare only patients counted; (ii) do 

facilities count catheters even if there is 

another access in place; and (iii) how 

should facilities report the ‘‘90 day’’ 

requirement if the V-codes do not match 

this criterion? Some commenters 

generally commented that the measure 

specifications are unclear and confusing 

and asked for clarification. 

Response: The proposed VAT 

measure specifications for the AV fistula 

submeasure do not contain a blood flow 

requirement but rather require that the 

dialysis was performed with two 

needles. We do not require blood flow 

because we assume that, if a fistula is 

used for dialysis treatment, the blood 

flow achieved is adequate to meet 

treatment goals. Since July 1, 2010, 

providers/facilities have been asked to 

report the access that was used for 

dialysis during the last dialysis session 

of the month covered by the claim (CR 

6782). These instructions were updated, 

effective January 1, 2012 (CR 7460), to 

state that, if an AV fistula/AV graft is 

used (both must be used with two 

needles to be reported), but the patient 

still has a catheter in use providers/ 

facilities should report the presence of 

both the catheter and the AV fistula/AV 

graft. Accordingly, for purposes of the 

measure calculation during the 

performance period, in instances where 

an AV fistula or AV graft is reported 

along with a catheter, we will only 

count the AV fistula or AV graft as the 

patient’s access type. For purposes of 

the measure calculation during the 

baseline period, we exclude any claims 

reporting more than one access type 

because we assume this was reported in 

error since the guidance did not indicate 

that more than one access type should 

be reported. Only Medicare patients are 

included in the proposed VAT measure 

because we will be calculating it using 

Medicare claims data. The 

specifications for the catheter 

submeasure exclude catheters present 

for less than 90 days during calculation 

of the catheter measure rate in order to 

allow time to establish another form of 

vascular access. All catheters must be 

reported regardless of duration of use, 

the 90 day exclusion will be applied at 

the time of measure rate calculations. 

We thank commenters for requesting 

clarification, and we would clarify in 

this final rule that, for the catheter 

submeasure, a patient will only be 

attributed to a facility if he or she was 

at that facility for the 90 days during 

which he or she had a catheter so that 

providers/facilities have adequate time 

to facilitate placement of a permanent 

access and are not penalized for care 

provided prior to the patient receiving 

care at the facility. Because claims do 

not specify the access type for each 

patient at every dialysis session, we also 

clarify that, if the last session of a month 

indicates only a catheter, we consider 

that patient to have had the catheter for 

the entirety of that month. 

We further clarify that we will use a 

patient-month methodology calculating 

the submeasure rates for the VAT 

measures (i.e. each patient’s value for 

each month will be included in the 

measure rate 9).The NQF measures 

which we referred to in the proposed 

rule are calculated for a one month time 

period; however, our measure 

specifications stated that the VAT 

measure can be calculated in a manner 

similar to the PY 2012 ESRD QIP 

measures which are calculated as a 

percent of patients (i.e. each patient’s 

mean or median value is calculated for 

the year at the facility and then the 

patient is classified as meeting the 


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10For example, if one patient was treated every 

month, his/her claim inputs would account for 

twelve, individual inputs for calculating the 

measure rate. Whereas a patient that is only seen 

for four months would be counted as four inputs. 

11We also encourage providers/facilities to utilize 

other clinical practice guidelines regarding patient 

education. See, for example, http://www.kidney.org/ 

professionals/kdoqi/pdf/12-50- 

0210_JAG_DCP_GuidelinesVA_Oct06_SectionC_ofC.pdf. 

requirement or not). We believe that 

patient-months would provide a more 

accurate picture of the care provided to 

a patient by weighting the VAT by the 

number of months that access was 

present. For instance, if a patient had a 

catheter for seven months out of the 

year and an AV fistula for 5 months, the 

patient’s ‘‘average’’ access would be a 

catheter and the facility would get no 

credit for the presence of an AV fistula. 

By using patient-months, we can more 

accurately assess these patients by 

counting seven of 12 months towards 

the catheter submeasure and five of 12 

months towards the AV fistula 

submeasure. This would also weight 

each patient’s contribution to the 

facility measure rate by the amount of 

time a patient received care in that 

facility.10

After considering the comments, we 

finalize the VAT measure for the PY 

2014 ESRD QIP with the clarifications 

and changes discussed above. This 

measure is comprised of two 

submeasures, one of which measures 

catheters and one of which measures 

AV fistulas. The VAT measure 

specifications can be found at http:// 

www.dialysisreports.org/pdf/ 

esrd/public-measures/ 

VascularAccess-Fistula-2014-FR.pdf 

and http://www.dialysisreports.org/ 

pdf/esrd/public-measures/ 

VascularAccess-Catheter-2014-FR.pdf. 

iv. Vascular Access Infections (VAI) 

Measure 

We proposed to measure dialysis 

access-related infection rates by 

assessing the number of months in 

which a monthly hemodialysis claim 

reports a dialysis access-related 

infection using HCPCS modifier V8, and 

we noted that since July 1, 2010, we 

have asked dialysis providers/facilities 

to code all Medicare claims for dialysis 

access-related infections using this 

modifier (CR 6782). As discussed more 

fully in the proposed rule, we proposed 

to adopt this measure under section 

1881(h)(2)(B)(ii) of the Act. 

The public comments we received on 

the VAI measure and our responses are 

set forth below. 

Comment: Many commenters 

commended CMS for moving towards 

measuring infections. However, some 

commenters noted that infections 

should not be measured through claims 

because claims data are unable to 

provide precise identification of 

healthcare-associated infections (HAIs), 

nor do they provide information in a 

timely manner to effectively drive 

quality improvement. Additionally, 

several commenters noted or asked for 

clarification regarding whether claims 

can result in duplicative counting of a 

patient with a recurrent infection, 

penalizing a facility twice (or more) for 

the same event. Commenters also stated 

that CMS has not issued specific 

guidance for uniformity in reporting the 

V8/V9 modifiers and requested a 

workable definition of VAI to account 

for cases where it is difficult to 

accurately identify the source of 

infection. One commenter argued that 

infection measures should not be a 

composite so that facilities can 

individualize areas of concern. Some 

commenters noted the measure’s lack of 

precedent and NQF endorsement, 

suggesting instead that CMS use the 

NHSN-endorsed measure (NQF #1460) 

(which would also prevent redundancy) 

or change the measure to a reporting 

measure only. 

Response: We agree that reducing 

vascular access infections is critical to 

improving quality of care because 

infections are one of the leading causes 

of morbidity and mortality among the 

Medicare ESRD population. 

Furthermore, many of these infections 

can be prevented through evidencebased practices. However, in response to 

these comments, we reassessed our 

proposal and concluded that the claimsbased data that we proposed to use to 

calculate this measure is not detailed 

enough and, as a result, could lead to 

inaccurate assessments and 

comparisons of quality. In addition, we 

are also proposing that providers/ 

facilities begin reporting similar 

information via the CDC NHSN Dialysis 

Event reporting system and recognize 

the burden that may result from 

requiring reporting to two separate 

systems for purposes of the ESRD QIP. 

We note that commenters were much 

more supportive of the CDC infection 

tracking system and the associated 

NHSN-based blood stream infection 

measure which is NQF-endorsed 

(#1460) and upon which we based the 

NHSN Dialysis Event reporting measure. 

Given the overall quality of the data 

obtained through the NHSN system and 

the general support expressed by the 

ESRD community, we believe that 

patients’ needs will be best served if 

providers/facilities focus efforts on 

reporting infection data via the CDC 

NHSN system. We recognize that the 

proposed PY 2014 NHSN Dialysis Event 

reporting measure would not be 

calculated using actual infection data, 

but we will consider incorporating a 

measure which is calculated based on 

the substance of the data collected 

through the NHSN Dialysis Event 

reporting system for future years if the 

data indicates a need for financial 

incentives to drive improvement. 

Comment: One commenter argued 

that, because of the prevalence and costs 

associated with catheter related 

infections, catheter measures should be 

in the PY 2012 ESRD QIP and, because 

the ESRD QIP can only penalize a 

facility by up to two percent, a new 

program should be implemented to 

penalize facilities further for catheter 

infections. Additionally, this 

commenter stated that ESRD facilities 

should be required to educate patients 

on appropriate homecare and supplies 

to help prevent infection. 

Response: We thank the commenter 

for the input and concern. CMS 

continues to consider programs within 

its statutory authority which will lead to 

an increase in the quality of care 

provided to Medicare ESRD 

beneficiaries. The PY 2012 ESRD QIP, 

however, has been finalized, and we 

have calculated and will shortly be 

implementing the resulting payment 

reductions. We note that the ESRD 

Conditions for Coverage require that the 

patient be included as a member of the 

dialysis multidisciplinary team, and 

that providers/facilities educate patients 

and promote appropriate patient care 

(for example 42 CFR 494.90(d)).11

For the reasons discussed above, we 

are not finalizing the VAI measure for 

use in the PY 2014 ESRD QIP. We will 

consider proposing in future rulemaking 

to adopt a CDC NHSN-based clinical 

measure that assesses infection rates 

related to dialysis. 

v. Standardized Hospitalization Ratio 

(SHR)-Admissions Measure 

In the proposed rule, we proposed to 

adopt the SHR-Admissions measure to 

measure hospitalizations for Medicare 

dialysis patients. We proposed to adopt 

this measure under section 

1881(h)(2)(A)(iii) of the Act. The 

proposed SHR-Admissions measure is a 

risk-adjusted measure of 

hospitalizations for Medicare dialysis 

patients. The data needed to calculate 

the proposed SHR-Admissions measure 

is based on claims and has been 

regularly reported to DFR since 1995 

(previously known as Unit-Specific 

Reports). We noted that the measure is 

an ‘‘all-cause’’ measure, meaning that 


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hospitalizations related to other medical 

conditions outside of ESRD are included 

in the measure. We refer readers to the 

proposed rule for further information on 

this proposed measure (76 FR 40524). 

The public comments we received on 

the SHR-Admissions measure and our 

responses are discussed below. 

Comment: Many commenters voiced 

concern that the SHR-Admissions 

measure does not reflect issues that 

dialysis facilities can control, may lead 

to untimely or inappropriate care, and is 

not adequately transparent in its 

calculation. Commenters also stated that 

the measure may lead to ‘‘cherrypicking’’ of patients based on their risk 

of hospitalizations, causing access to 

care issues for patients with more severe 

illness. Commenters suggested that, 

instead, CMS measure hospitalizations 

resulting from the care, or lack of care, 

provided by ESRD facilities. Other 

commenters disapproved of the SHRAdmissions measure because there is 

currently no mechanism either for 

correcting or updating patient 

comorbidity data on CMS’ Medical 

Evidence Reporting Form 2728, and 

these comorbidities affect the 

calculation of the measure. Another 

commenter stated that, because patients 

in nursing homes are more likely to 

have a greater number and severity of 

comorbidities, the metrics for 

independent living patients and nursing 

home patients should be compared to 

determine if the established goals place 

nursing homes at a disadvantage in 

achieving such goals. Another 

commenter suggested that, because of 

the issues mentioned above, if CMS 

retains the measure, it should weight it 

less than the other clinical measures. 

Some commenters suggested that CMS 

use a longer baseline period, such as 

four years. 

Response: After reviewing these 

comments, we have decided, for the 

reasons articulated by commenters, to 

not finalize our proposal to adopt the 

SHR-Admissions measure for the PY 

2014 ESRD QIP. We recognize concerns 

that this measure may not promote 

improved patient care and may not 

accurately reflect hospitalizations which 

can be controlled by dialysis facilities, 

and we are concerned about the 

potential for ‘‘cherry-picking.’’ We are 

additionally concerned that we do not 

yet have the necessary data to more 

accurately risk-adjust the measure. 

Therefore, after considering the 

comments, we agree that the measure as 

proposed should not be included in the 

PY 2014 ESRD QIP. We intend, 

however, to work to develop a measure 

for future years of the ESRD QIP that 

does not raise the issues identified by 

the commenters, and we welcome 

public input on the composition of such 

a measure. 

Comment: One commenter supported 

tracking hospitalization rates among 

dialysis clinic patients. Another 

commenter suggested that the SHRAdmissions measure could be used as a 

balancing measure once CMS retires the 

Hemoglobin Less Than 10 g/dL measure 

to ensure that patients do not 

experience hospitalizations due to 

hemoglobin levels that are too low. 

Response: We thank the commenters 

for their support, but, for the reasons 

stated above, we will not include this 

measure in the program at this time. 

While the SHR-Admissions measure 

would include hospitalizations due to 

anemia, the SHR-Admissions is an allcause measure, and it is uncertain how 

sensitive it would be in detecting 

practice changes and patient outcomes 

related to anemia management alone. As 

we have stated, we will continue to 

work with the ESRD community to 

develop appropriate measures reflecting 

hospitalizations and will specifically 

consider measures which account for 

hospitalizations related to inappropriate 

anemia management. 

For the reasons discussed above, we 

are not finalizing the SHR-Admissions 

measure for use in the PY 2014 ESRD 

QIP. We intend to work with the 

community to adopt a measure for 

future years of the program that more 

accurately measures quality of care in 

this area. 

vi. Minimum Case Number for Clinical 

Measures and Other Considerations 

We proposed that a provider/facility 

would need to report a minimum 

number of eleven cases for a proposed 

clinical performance measure in order 

to receive a score on that measure (76 

FR 40533). As stated above, we believe 

that this minimum threshold will help 

reduce the possibility that a small 

number of poor outcomes artificially, 

and for reasons unrelated to the quality 

of care, skew a small provider’s/ 

facility’s performance score. 

The comments we received regarding 

this proposal and our responses are set 

forth below. We also address other 

comments regarding the measures we 

proposed to adopt for the PY 2014 ESRD 

QIP below. 

Comment: Commenters voiced 

concerns about CMS’ approach to 

including low-volume facilities in the 

program because one patient could 

significantly affect a score for reasons 

unrelated to quality of care, such as 

comorbidities. This scoring could, in 

turn, affect patient volume if patients 

and their care-givers judge facilities 

based on their scores. Commenters 

suggested different minimum case 

thresholds such as 20 cases or 25 cases, 

or that providers with fewer cases be 

scored differently; some commenters 

also noted that their studies showed that 

the sample size rather than overall 

performance is driving the results for 

facilities and requested that CMS raise 

the case minimum to 20. Another 

commenter urged CMS to research the 

reliability of a measure to set the 

minimum number of cases, publish 

minimum case reliability data, and use 

this data to set a minimum number of 

cases for all value-based purchasing 

programs. One commenter urged CMS 

to re-consider its scoring methodology 

to analyze for statistical significance. 

Another commenter stated the belief 

that the ESRD QIP methodology does 

not appropriately account for low 

patient census, unusual treatment 

setting, or patient case-mix, and 

recommended that CMS develop a 

mechanism to adjust for circumstances 

in which facilities with an unusual care 

setting, atypical case-mix, or small 

patient census may be at high risk of 

incurring penalties for failure to meet 

performance standards. 

Response: We appreciate the 

commenters’ concerns regarding the 

potential impact of patient case mix on 

smaller providers/facilities. One goal of 

the ESRD QIP is to accurately assess the 

quality of care provided by a provider/ 

facility. However, we recognize that a 

quality measure score could be 

impacted by one or more factors 

unrelated to the care furnished by the 

provider/facility, and that the potential 

of such factors to greatly skew the 

calculation decreases as the number of 

cases included in the measure increases. 

Similarly, a provider/facility with a 

small number of patients could find that 

one patient’s outcome determined its 

score on a quality measure. Thus we 

proposed that a provider/facility would 

need to have a minimum of eleven cases 

that meet the eligibility criteria for a 

measure in order to be scored on that 

measure. This eleven case minimum 

allows as many providers/facilities as 

possible to participate in the program. 

This minimum case number is also 

consistent with how we have 

traditionally reported measures on 

Dialysis Facility Compare. We will 

continue to closely monitor beneficiary 

access to care, including evaluating the 

rate of facility closures. 

We recognize, however, that we are 

introducing new measures and scoring 

methodologies for the PY 2014 program. 

As additional data becomes available for 

these measures, we will conduct 

additional analysis to assess our case 


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minimum. If we determine that a 

different threshold is more appropriate, 

we will propose an alternative scoring 

approach in future rulemaking for the 

ESRD QIP to ensure that smaller or lowvolume facilities are not unfairly 

penalized. 

Comment: One commenter urged 

CMS to use only NQF-endorsed 

measures for the ESRD QIP because of 

the NQF’s high level of review. Because 

none of the PY 2014 measures are NQFendorsed, this commenter does not 

support their adoption. 

Response: We believe that, when 

evaluating measures for the ESRD QIP, 

it is important to consider measures 

endorsed by NQF and other consensusbased entities and we have based our 

measures on available endorsed 

measures where possible. We note, 

however, that under Section 1881(h) of 

the Act, the Secretary has discretion to 

adopt measures that are not NQFendorsed in certain circumstances. We 

refer readers to our discussions of our 

rationale for adopting the individual 

measures, above. 

Comment: Commenters noted that the 

same data sent to multiple laboratories 

can yield different results from each 

laboratory. They noted that this 

variability, rather than the actual care 

delivered, may affect provider’s/ 

facility’s rates and, ultimately, their 

Total Performance Scores. These 

commenters suggested that CMS 

incorporate an acceptable standard 

deviation value into the measure rate 

calculations in order to mitigate this 

variability. One commenter also stated 

that CMS should allow rounding to the 

tenth to address ‘‘between instrument 

variability within a single laboratory.’’ 

Response: The proposed PY 2014 

scoring methodology allows providers/ 

facilities some latitude to account for 

issues such as laboratory variability. For 

example, as further explained below, 

providers/facilities need not score at the 

performance standard for each measure 

in order to avoid a payment reduction. 

We believe that such flexibility 

mitigates concerns about details such as 

laboratory variability. We do agree that 

it is important to account for the 

precision of the data that we use to 

calculate rates and scores, and, as 

explained above with regard to the 

Hemoglobin Greater Than 12 g/dl 

measure, we will specify the number of 

decimal places for measure calculations 

to reflect the precision of the data 

submitted by providers/facilities. 

Comment: One commenter requested 

clarification that the PY 2014 measures 

do not apply to providers/facilities that 

only treat patients receiving peritoneal 

dialysis (PD). 

Response: Two of the measures apply 

to PD patients and, therefore, PD-only 

facilities will be evaluated on these 

measures. According to the 

specifications, adult PD patients would 

be included in the calculations for the 

following measures: Hemoglobin 

Greater Than 12 g/dL, and the Mineral 

Metabolism reporting measure. Pediatric 

PD patients qualify for the mineral 

metabolism reporting measure. 

For the reasons stated above, we are 

finalizing our proposal that a provider/ 

facility must have a minimum of eleven 

cases for a measure, each with four 

claims, in order to receive a score for 

that measure. 

vii. National Healthcare Safety Network 

(NHSN) Dialysis Event Reporting 

Measure 

As we noted in the proposed rule, 

healthcare-associated infections (HAI) 

are a leading cause of preventable 

mortality and morbidity across different 

settings in the healthcare sector, 

including dialysis facilities. In a 

national effort to reduce this outcome, 

Department of Health and Human 

Services agencies, including CMS, are 

partnering with the Centers for Disease 

Control and Prevention (CDC) to 

encourage providers to report to the 

NHSN as a way to track and facilitate 

action for reducing HAIs. 

The NHSN is currently a secure, 

Internet-based surveillance system that 

integrates patient and healthcare 

personnel safety surveillance systems 

managed by the Division of Healthcare 

Quality Promotion at the CDC. NHSN 

has been operational since 2008 with 

acute care hospitals, long term acute 

care hospitals, psychiatric hospitals, 

rehabilitation hospitals, outpatient 

dialysis centers, ambulatory surgery 

centers, and long term care facilities. We 

believe that reporting dialysis events to 

the NHSN by all providers/facilities 

would support national goals for patient 

safety, and particularly goals for the 

reduction of HAIs. Accordingly, for the 

PY 2014 ESRD QIP we proposed to 

adopt a measure that would assess 

whether providers/facilities enroll and 

report dialysis event data to the NHSN. 

We stated our belief that, by 

measuring only whether providers/ 

facilities report dialysis event data to 

the NHSN, providers/facilities would be 

given time to become familiar with the 

NHSN reporting process. We also noted 

our intention in the future to propose to 

adopt a measure that would score 

providers/facilities based on actual 

dialysis events reported to the NHSN if 

necessary. Specifically, we proposed 

that providers/facilities: (i) Enroll in the 

NHSN and complete any training 

required by the CDC; and (ii) submit 

three or more consecutive months of 

dialysis event data to the NHSN. 

Section 1881(h)(2)(B)(i) of the Act 

requires that unless the exception set 

forth in section 1881(h)(2)(B)(ii) applies 

to the Act, the measures specified for 

the ESRD QIP under section 

1881(h)(2)(A)(iii) of the Act must have 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act (which is currently the NQF). 

Section 1881(h)(2)(B)(ii) of the Act 

states that, in the case of a specified area 

or medical topic determined appropriate 

by the Secretary for which a feasible and 

practical measure has not been endorsed 

by the entity with a contract under 

section 1890(a) of the Act, the Secretary 

may specify a measure that is not so 

endorsed as long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

Although a measure calculated using 

NHSN Dialysis Event data is currently 

endorsed by the NQF, the measure for 

reporting purposes only has not been 

NQF-endorsed. We noted that because 

HAIs are a significant patient safety 

concern, we intend to propose to adopt 

one or more measures that assess actual 

dialysis event rates in the future if 

necessary. 

The public comments we received on 

the proposed NHSN Dialysis Event 

reporting measure and our responses are 

discussed below. 

Comment: Many of the commenters 

voiced general approval of the proposed 

NHSN reporting measure, but voiced 

concern that the required training, 

enrolling, and reporting will unduly 

burden many facilities, diminishing the 

amount of time staff can focus on 

patients. One commenter suggested that 

CMS more clearly study and define 

what is needed of staff before moving 

forward with the measure. Other 

commenters noted that CROWNWeb 

will be collecting similar data upon its 

implementation, leading to redundancy 

in reporting and further burdening 

providers/facilities, and requested that 

CMS delay an infection reporting 

measure until it can be recorded via 

CROWNWeb. Commenters also noted 

that this measure is redundant because 

it captures data already being captured 

by other measures. Other commenters 

expressed concern that the CDC does 

not have infrastructure to be able to 

support the high volume of new reports 

and facilities will not have the 

necessary reporting mechanisms in 

place to submit these reports. They 

suggested that providers/facilities only 

be scored on enrolling and training for 

PY 2014, delaying actual reporting of 


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12 In order to successfully field the survey, the 

facility/provider must follow the recommendations 

found at: https://www.cahps.ahrq.gov/CAHPSkit/ 

files/53_Fielding_the_ICH_Survey.pdf. 

data to allow providers/facilities to 

prepare to meet the NHSN requirements 

and the NHSN to prepare for receiving 

these reports. One commenter noted 

that the CDC reporting requires manual 

entry which can lead to data entry error 

and suggested the CMS arrange an 

alternative mechanism for collection; 

another commenter suggested that this 

mechanism be CROWNWeb. 

Response: The CDC has informed us 

that it is preparing for the additional 

volume of new system enrollees and 

data reporting that will result from the 

ESRD QIP and is enhancing the NHSN’s 

technical infrastructure. Additionally, 

our proposal that providers/facilities 

submit, at a minimum, only three 

consecutive months of data in CY 2012 

is expected to lessen the demand on the 

NHSN’s infrastructure. Thus, we believe 

that the CDC will be able to 

accommodate the additional data that 

will be reported to the NHSN as a result 

of this measure. 

Furthermore, we do not believe that 

this reporting requirement will unduly 

burden providers/facilities. For facilities 

that are currently enrolled in the NHSN, 

CDC has studied what is required of 

staff in order to comply with this 

reporting. In addition, we believe that 

this reporting requirement will not be 

burdensome because, reporting this data 

will only take five to ten minutes per 

patient, or a total of two hours and ten 

minutes, of staff time per month for a 

facility of average size. Although we 

stated in the proposed rule that we 

believed that enrolling and training 

would take a total of 48 hours per 

facility (76 FR 40540), based on data we 

have since received from the CDC, we 

have revised that analysis in the final 

rule and now believe that both enrolling 

and training, each a one-time event, will 

take approximately 8 total hours, spread 

across a period of several weeks, to 

complete. Although the NHSN currently 

requires manual entry of data, CDC is 

moving towards an electronic system 

that will further reduce the time 

required for data entry and reduce the 

opportunity for error. 

Finally, we, as we noted above, we 

agree with this measure’s possible 

redundancy and we are no longer 

adopting the VAI measure for PY 2014. 

Thus, the NHSN measure will be the 

only measure related to infections. 

Furthermore, we do not intend to 

require reporting of the same data 

elements to both the NHSN and 

CROWNWeb. It is our intent to require 

providers/facilities to report dialysis 

event data to only one system. 

Despite our belief that this measure 

will not unduly burden providers/ 

facilities, to decrease any perceived 

burden and to further align our 

reporting requirements with those of 

NHSN, we will allow all facilities until 

March 31, 2013 at 11:59 EST to report 

these data as allowed by the NHSN 

system. 

Comment: One commenter suggested 

that, if CMS requires this burdensome 

reporting, CMS should increase its base 

rate for dialysis care. Another 

commenter noted that this measure does 

not increase quality because it only 

requires reporting. 

Response: Section 1881(h) of the Act 

does not authorize the Secretary to 

increase the base rate for dialysis care. 

Furthermore, we do not agree that this 

measure does not incentivize quality. In 

order for providers/facilities to 

successfully report at least 3- 

consecutive months of data to the 

NHSN, the provider/facility must either 

have or must implement processes to 

record dialysis infection events. This 

implementation will require providers/ 

facilities to begin monitoring dialysis 

events and could draw their attention to 

areas in need of improvement. In future 

years of the ESRD QIP, we will consider 

incorporating a measure based on 

providers’/facilities’ infection rates. 

For the reasons stated above, we are 

adopting the NHSN reporting measure 

for the PY 2014 ESRD QIP. 

viii. Patient Experience of Care Survey 

Usage Measure 

Section 1881(h)(2)(A)(ii) of the Act 

states that the measures specified for the 

ESRD QIP shall include, to the extent 

feasible, a measure (or measures) of 

patient satisfaction as the Secretary 

shall specify. Information on patient 

experience with care at a facility is an 

important quality indicator to help 

providers/facilities improve services to 

their patients and to assist patients in 

choosing a provider/facility at which to 

seek care. We proposed to adopt a 

measure for the PY 2014 ESRD QIP that 

assesses provider/facility usage of the 

In-Center Hemodialysis (ICH) Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS) Survey. The intent of 

including this reporting measure is to 

assess the degree to which providers/ 

facilities are providing their patients 

with a voice in the quality of their 

hemodialysis care. 

We proposed to measure whether a 

provider/facility administers the survey, 

but we did not propose to measure a 

provider’s/facility’s actual performance 

based on the survey results. We expect 

to adopt such a measure for the ESRD 

QIP in future rulemaking. For purposes 

of reporting this proposed measure for 

the ESRD QIP, we stated that we will 

consider the ICH CAHPS survey to have 

been administered if the provider/ 

facility administered it in accordance 

with the current specifications for the 

survey. These specifications can be 

accessed at: https:// 

www.cahps.ahrq.gov/content/products/ 

ICH/ 

PROD_ICH_Intro.asp?p=1022&s=222.12

We proposed to measure whether a 

provider/facility has attested that it 

successfully administered the ICH 

CAHPS survey during the performance 

period for the PY 2014 program. We 

proposed that providers/facilities would 

be required to submit this attestation 

through CROWNWeb (which will be 

implemented nationally in 2012) by 

January 30, 2013 at 11:59 p.m. EST. 

The public comments we received 

regarding the proposed ICH CAHPS 

reporting measure and our responses are 

discussed below. 

Comment: Many of the commenters 

were generally supportive of a patient 

experience measure, but stated that the 

ICH CAHPS survey is too burdensome 

for patients to complete and for 

providers/facilities to implement. 

Several of these commenters suggested 

that, instead, either providers/facilities 

be allowed to field any type of patient 

experience survey or CMS adopt a more 

simplistic patient experience measure. 

Other commenters suggested that the 57 

question survey be split into three 

independently verified domains, each 

given to one-third of the patient 

population and each including a set of 

core questions, to lessen patient burden 

and prevent incomplete surveys. One 

commenter believes the survey should 

more adequately address the range of 

care a patient may receive and suggested 

that CMS develop a process measure to 

allow patients to voice individual 

dialysis experiences. Some commenters 

asked CMS to implement a survey that 

is validated across all treatment 

modalities and settings; another 

commenter asked CMS to clarify 

whether the survey applies to PD and 

HHD. One commenter also noted that 

this measure alone is not sufficient 

because it requires providers/facilities 

to attest to administration of the survey, 

but it does not base payment reductions 

upon the results of these surveys. 

Response: We thank commenters for 

their support and suggestions. As we 

noted in the proposed rule (76 FR 

40525), we believe empowering patients 

to voice their concerns is a critical part 

of quality improvement. Patient surveys 

can, and should, draw provider/facility 


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13See https://www.cahps.ahrq.gov/content/ 

products/ICH/PROD_ICH_Intro.asp?p=1022&s=222. 

14https://www.cahps.ahrq.gov/content/products/ 

ICH/PROD_ICH_Intro.asp?p=1022&s=222. 

15 Kidney Disease: Improving Global Outcomes 

(KDIGO) CKD–MBD Work Group. KDIGO clinical 

practice guideline for the diagnosis, evaluation, 

prevention, and treatment of chronic kidney 

disease–mineral and bone disorder (CKD–MBD). 

Kidney International 2009; 76 (Suppl 113): S1– 

S130. 

16 Kidney Disease: Improving Global Outcomes 

(KDIGO) CKD–MBD Work Group. KDIGO clinical 

practice guideline for the diagnosis, evaluation, 

prevention, and treatment of chronic kidney 

disease–mineral and bone disorder (CKD–MBD). 

Kidney International 2009; 76 (Suppl 113): S1– 

S130.) 

attention to insights that can only be 

provided by those receiving care. Given 

the importance of this survey, we do not 

believe the burden to patients or 

providers/facilities outweighs the 

importance of this measure. Many of the 

concerns the commenters voiced can be 

mitigated without decreasing the 

number of questions on the survey or 

how the survey is administered. For 

example, as the specifications 

indicate,13 patients may take a break 

during the administration of the survey 

or take the survey in multiple sittings if 

they feel that the number of questions 

is too great to answer at one time. 

Additionally, the survey requires thirdparty administration, taking no 

additional dialysis staff time. 

We note that the ICH CAHPS survey 

was developed through the study of 

surveys used by dialysis providers. The 

CAHPS tool went through extensive 

testing during development including 

focus groups and one-on-one patient 

sessions. Thus, we believe that this 

survey is the best method available at 

this time to measure patient experience. 

We also note that we intend to develop 

a measure that evaluates providers/ 

facilities based on patient responses to 

the ICH CAHPS survey and use of a 

uniform survey tool will allow us to 

more accurately compare providers/ 

facilities in future years of the program. 

Furthermore, we disagree that this 

reporting measure does not improve 

quality. In order to successfully report 

the measure, providers/facilities must 

attest that they have successfully 

administered the ICH CAHPS survey. 

The results of these surveys will be 

reported to the provider/facility by the 

third-party administrator, and these 

results can draw providers’/facilities’ 

attention to areas in need of 

improvement. 

Finally, we thank commenters for 

their suggestions in developing new 

measures. The ICH CAHPS survey was 

developed for adult in-center HD 

patients and this measure therefore does 

not apply to HHD, PD, or pediatric 

patients. Further, at this time, we are 

not aware of a tool which allows 

patients to rate their experiences for 

every dialysis experience. We continue 

to evaluate opportunities to accurately 

capture patient experience for all 

modalities. 

Comment: Some commenters 

expressed concern that CROWNWeb 

will not be available or will be 

unreliable for submitting the ICH 

CAHPS survey attestations. These 

commenters, however, also thought that 

a paper attestation would be overly 

burdensome. They encouraged CMS to 

work with the community to offer an 

alternative solution. 

Response: CROWNWeb is on 

schedule for national release in CY 2012 

which will allow providers/facilities to 

report their attestations by the January 

2013 deadline. We do recognize, 

however, that unanticipated delays may 

occur. Therefore, if CROWNWeb will 

not be available in time for the January 

30, 2013 attestation deadline, we will 

adopt an alternative, electronic mode of 

attestation and notify providers/ 

facilities of this method through the 

ESRD Networks. 

Comment: One commenter noted 

discrepancies between the ICH CAHPS 

specifications and the proposed 

regulation, including (i) ICH CAHPS 

requires survey administration to all or 

a random sample of patients (depending 

on how many patients the facility 

serves), whereas the proposed 

regulation requires surveying in-center 

hemodialysis patients, and (ii) ICH 

CAHPS recommends using third-party 

survey administrators, whereas the 

proposed regulation seems to expect 

facilities to survey their own patients. 

This commenter noted concern that 

requiring a third-party survey 

administrator will unequally burden 

small clinics. Another commenter 

requested that facilities be allowed to 

administer their own surveys, provided 

that those fielding the surveys are not 

center staff. 

Response: As outlined in the 

specifications,14 the ICH CAHPS survey 

was developed for adult, in-center 

hemodialysis patients and, therefore, 

this is the population to which it must 

be administered. Specifically, it must be 

administered to all patients meeting 

these criteria or, if a facility cares for 

over 200 such patients, a random 

sample of 200. This administration must 

be completed by a third-party; https:// 

www.cahps.ahrq.gov/content/products/ 

ICH/ 

PROD_ICH_Intro.asp?p=1022&s=222. 

Even if the surveys were not 

administered by staff with whom the 

patient had a direct relationship, a 

patient could still feel pressure to 

refrain from responding candidly. It is 

crucial that patients feel comfortable 

answering honestly and openly, and, 

therefore, it is vital that this survey be 

administered by a third-party. As we 

noted above, although we are aware of 

the burden associated with this 

administration, we do not believe it 

outweighs the importance of 

recognizing patients’ experience of care. 

For the reasons discussed above, we are 

finalizing the use of the ICH CAHPS 

reporting measure in the PY 2014 ESRD 

QIP. 

ix. Mineral Metabolism Reporting 

Measure 

Section 1881(h)(2)(A)(iii) of the Act 

states that the measures specified for the 

ESRD QIP shall include other measures 

as the Secretary specifies, including, to 

the extent feasible, measures of bone 

mineral metabolism. Abnormalities of 

bone mineral metabolism are 

exceedingly common and contribute 

significantly to morbidity and mortality 

in patients with advanced CKD. 

Numerous studies have associated 

disorders of mineral metabolism with 

morbidity, including fractures, 

cardiovascular disease, and mortality. 

Overt symptoms of these abnormalities 

often manifest in only the most extreme 

states of calcium-phosphorus 

dysregulation, which is why we believe 

that routine blood testing of calcium 

and phosphorus is necessary to detect 

abnormalities.15

The Kidney Disease: Improving 

Global Outcomes (KDIGO) 2009 

guideline recommends that the serum 

phosphorus level in a dialysis patient 

generally be lowered toward the normal 

range, but does not recommend a 

specific target level that would apply to 

all patients.16 The guideline also 

recommends that therapy to correct for 

abnormal levels be administered based 

on the health needs of the individual 

patient. Accordingly, we noted in the 

proposed rule that we do not feel it is 

appropriate at this time to propose to 

adopt a measure that would penalize 

providers/facilities if they did not 

achieve a specific target serum 

phosphorus level in all patients. We 

also noted that there is currently no 

NQF-endorsed measure dealing with the 

achievement of specific target 

phosphorus levels. In the time since this 

rule was proposed, the NQF has 

endorsed a mineral metabolism measure 

based on calcium levels (NQF #1454) 

which we will consider proposing for 


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17See http://www.qualityforum.org/Projects/e-g/ 

End_Stage_Renal_Disease_2010/ 

End_Stage_Renal_Disease_2010.aspx for more 

information regarding the National Voluntary 

Consensus Standards for ESRD. 

future years of the ESRD QIP.17 We also 

noted that the NQF has previously 

endorsed phosphorus and calcium 

monitoring measures (NQF #0261 and 

NQF #0255) and, in 2008, we adopted 

serum calcium and serum phosphorus 

monitoring as CPMs (http:// 

www.dialysisreports.org/ 

ESRDMeasures.aspx). Despite the 

current lack of consensus on specific 

target ranges for both phosphorus and 

calcium levels in dialysis patients, we 

stated our belief that there is consensus 

that monthly monitoring of calcium and 

phosphorus is important for early 

detection of abnormalities. 

Section 1881(h)(2)(B)(i) of the Act 

requires that unless the exception set 

forth in section 1881(h)(2)(B)(ii) of the 

Act applies, the measures specified for 

the ESRD QIP under section 

1881(h)(2)(A)(iii) of the Act must have 

been endorsed by the entity with a 

contract under section 1890(a) of the 

Act (which is currently the NQF). Under 

the exception set forth in section 

1881(h)(2)(B)(ii) of the Act, in the case 

of a specified area or medical topic 

determined appropriate by the Secretary 

for which a feasible and practical 

measure has not been endorsed by the 

entity with a contract under section 

1890(a) of the Act, the Secretary may 

specify a measure that is not so 

endorsed as long as due consideration is 

given to measures that have been 

endorsed or adopted by a consensus 

organization identified by the Secretary. 

Although we gave due consideration 

to the NQF-endorsed measures on 

phosphorus and calcium level 

monitoring in dialysis patients, we 

noted that it is not feasible for us to 

propose to adopt either of them at this 

time as we do not currently collect data 

on whether these levels are checked for 

each patient each month to allow 

calculation of the measure rates. We are 

also not aware that any other consensus 

building entity has endorsed or adopted 

measures on this topic. Therefore, we 

proposed to adopt a Mineral Metabolism 

reporting measure that is based on the 

two NQF-endorsed measures, but 

requires providers/facilities to attest to 

compliance with monthly monitoring, 

and we proposed to adopt it under 

section 1881(h)(2)(B)(ii) of the Act. 

We proposed that providers/facilities 

would be required to submit an 

attestation through CROWNWeb that 

they have conducted the appropriate 

monitoring. We further proposed that 

this reporting must be electronically 

submitted by January 30, 2013 at 11:59 

p.m. E.S.T. 

We also noted that we anticipate 

adopting, for future years of the ESRD 

QIP, one or more mineral metabolism 

clinical measures in addition to or in 

replacement of the proposed Mineral 

Metabolism reporting measure. 

The public comments regarding the 

proposed Mineral Metabolism reporting 

measure and our responses are 

discussed below. 

Comment: Several commenters 

expressed support for this measure, but 

requested that CMS also develop an 

outcomes measure for phosphorus for 

submission to the NQF for endorsement 

as soon as feasible. Several commenters 

urged CMS to also adopt a parathyroid 

hormone (PTH) measure in order to 

encompass all areas of bone mineral 

metabolism. One commenter noted the 

morbidity and mortality risks associated 

with extreme PTH values and stated that 

it is important to monitor the number of 

patients with PTH below 100 pg/mL and 

above 400 pg/mL who are not on 

therapy. Another commenter suggested 

that CMS consider the addition of a 

statement in the attestation to indicate 

that a treatment plan is in place for any 

abnormalities in bone mineral 

metabolism; one commenter also 

expressed concern that the reporting 

measure alone would not improve 

quality. 

Response: We do not agree that this 

measure does not incentivize quality. In 

order to successfully report the measure, 

providers/facilities must attest that they 

have monitored calcium serum and 

phosphorous serum at least once a 

month for each Medicare ESRD patient, 

and to do that, the provider/facility 

must either have or implement 

processes to collect and monitor this 

data. This monitoring could draw 

provider/facility attention to areas in 

need of improvement and mineral 

metabolism concerns for individual 

patients. 

We continue to explore new measures 

in the area of bone mineral metabolism; 

we will consider commenters’ 

suggestions for additional measures for 

future years of the ESRD QIP, including 

outcomes-based bone mineral 

metabolism measures and measures that 

indicate whether a treatment plan is in 

place for identified abnormalities. 

Comment: One commenter agreed that 

the Mineral Metabolism measure should 

be a reporting measure only and 

discouraged CMS from instituting a 

clinical measure unless and until 

studies prove a causal relationship 

between certain values and morbidity 

and mortality. 

Response: We thank this commenter 

for the support. We will consider 

commenters’ suggestion as we develop a 

mineral metabolism measure for future 

years of the ESRD QIP. 

Comment: Some commenters 

expressed concern that CROWNWeb 

will not be available or will be 

unreliable for submitting the Mineral 

Metabolism attestations. These 

commenters, however, also thought that 

a paper attestation would be overly 

burdensome. They encouraged CMS to 

work with the community to offer an 

alternative solution. 

Response: CROWNWeb is on 

schedule for national release in CY 2012 

which will allow providers/facilities to 

report their attestations by the January 

2013 deadline. We do recognize, 

however, that unanticipated delays may 

occur. Therefore, if CROWNWeb will 

not be available in time for the January 

30, 2013 attestation deadline, we will 

provide an alternative, electronic mode 

of attestation and notify providers/ 

facilities of this method through the 

ESRD Networks. 

For the reasons discussed above, we 

are finalizing the Mineral Metabolism 

reporting measure for the PY 2014 ESRD 

QIP. We note that, as we proposed, a 

provider/facility must attest that it 

measured the calcium and phosphorous 

of each Medicare ESRD patient at least 

once per month. 

3. Performance Period for the PY 2014 

ESRD QIP 

Having decided to propose to adopt 

all of CY 2011 as the performance 

period for the PY 2013 ESRD QIP, we 

examined what performance period 

would be most appropriate for the PY 

2014 ESRD QIP. We noted that we 

believe that a 12-month performance 

period is most appropriate for the ESRD 

QIP at this point in the program. We 

also noted that a period of a year 

accounts for seasonal variations, but 

also provides a timely incentive and 

feedback for providers/facilities, as well 

as timely performance information for 

Medicare beneficiaries. We have also 

determined that CY 2012 is the first 

feasible period during which we can 

collect sufficient performance period 

data for all of the proposed measures. 

Therefore, we proposed to select all of 

CY 2012 as the performance period for 

the PY 2014 ESRD QIP. 

The comments we received on the 

proposed selection of CY 2012 as the 

performance period and on the use of 

shorter performance periods in future 

years, and our responses are set forth 

below. 

Comment: Commenters applauded 

CMS for adopting a prospective 


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performance period of CY 2012 for the 

PY 2014 ESRD QIP and noted their 

disapproval of any performance period 

of less than a full year. 

Response: We thank commenters for 

their support of the proposed PY 2014 

performance period. We also believe 

that it is most appropriate and helpful 

for providers/facilities to be scored on a 

full year of data at this point in the 

program. 

For the reasons stated above, we are 

finalizing CY 2012 as the performance 

period for all of the finalized measures 

for the PY 2014 ESRD QIP. 

4. Performance Standards and the 

Methodology for Calculating the Total 

Performance Score for the PY 2014 

ESRD QIP 

Section 1881(h)(3)(A)(i) of the Act 

requires the Secretary to develop a 

methodology for assessing the total 

performance of each provider and 

facility based on the performance 

standards with respect to the measures 

selected for the performance period. 

The final rule entitled, ‘‘Medicare 

Programs; Hospital Inpatient ValueBased Purchasing Program,’’ appeared 

in the Federal Register on May 6, 2011 

(76 FR 26490) and set forth our view 

that value-based purchasing represents 

an important step in revamping how we 

pay for care and services, allowing CMS 

to move increasingly toward rewarding 

better value, outcomes, and innovations 

instead of merely paying for volume (76 

FR 26491). The final rule also set forth 

principles guiding the development of 

performance scoring methodologies, 

including: 

• Providers should be scored on their 

overall achievement relative to national 

or other appropriate benchmarks. In 

addition, scoring methodologies should 

consider improvement as an 

independent goal. 

• Measures or measurement domains 

need not be given equal weight, but over 

time, scoring methodologies should be 

more weighted towards outcome, 

patient experience, and functional 

status measures. 

• Scoring methodologies should be 

reliable, as straightforward as possible, 

and stable over time and enable 

consumers, providers, and payers to 

make meaningful distinctions among 

providers’ performance. 

For the PY 2014 ESRD QIP, we 

proposed to adopt a new performance 

scoring methodology to replace the 

methodology we are using for the PY 

2012 and are finalizing in this final rule 

for the PY 2013 ESRD QIP. We believe 

that this scoring methodology will more 

accurately reflect a provider’s/facility’s 

performance on the measures proposed 

for the PY 2014 ESRD QIP because it 

will enable us to differentiate between 

providers/facilities that simply meet the 

performance standards, those that 

exceed the performance standards by 

varying amounts, and those that fall 

short of the performance standards. We 

further believe that the proposed 

methodology will better incentivize 

providers and facilities to both achieve 

high Total Performance Scores and 

improve the quality of care they 

provide. 

i. Performance Standards for the PY 

2014 ESRD QIP 

For the PY 2014 ESRD QIP, we 

proposed to establish performance 

standards under section 1881(h)(4)(A) of 

the Act. This section of the Act 

generally provides that, subject to 

subparagraph (E), the Secretary shall 

establish performance standards with 

respect to measures selected for the 

ESRD QIP for a performance period with 

respect to a year. Furthermore, under 

section 1881(h)(4)(B) of the Act, the 

performance standards established 

under subparagraph (A) must include 

levels of achievement and improvement, 

as determined appropriate by the 

Secretary. To establish performance 

standards under section 1881(h)(4)(A) of 

the Act, the Secretary must also comply 

with section 1881(h)(4)(C) of the Act, 

which requires the Secretary to establish 

performance standards prior to the 

beginning of the performance period for 

the year involved. 

With respect to the anemia 

management and dialysis adequacy 

measures, we proposed to set the 

achievement performance standard 

under section 1881(h)(4)(A) of the Act 

as the national performance rate on each 

measure during a proposed baseline 

period. We proposed that the national 

performance rate for each measure 

would be calculated at the national 

aggregate level as the number of 

Medicare patients for whom the 

measure was achieved divided by the 

total number of Medicare patients 

eligible for inclusion in the measure. We 

also proposed to set the improvement 

performance standard as the national 

performance rate on each measure 

during the same proposed baseline 

period. We noted that our goal is to 

incentivize providers/facilities to 

achieve these national performance 

rates, whether they do so by attaining 

achievement points or improvement 

points under our proposed scoring 

methodology (76 FR 40527). We 

proposed to use a baseline period from 

July 1, 2010 to June 30, 2011 to calculate 

the national performance rate. We stated 

our belief that this baseline period 

would enable us to calculate national 

performance rate values for these 

proposed clinical measures before the 

beginning of the performance period. 

We indicated that we would specify 

these values in the final rule. 

With respect to the proposed VAT 

measure, we proposed to set 

performance standards using the same 

methodology and baseline period that 

we proposed to use for the other 

proposed clinical measures; however, 

we proposed to set performance 

standards for each of the subcomponent 

measures rather than for the overall 

combined measure. 

We proposed to establish the 

achievement performance standard for 

the proposed NHSN Dialysis Event 

reporting measure as the successful 

completion by providers/facilities of: (i) 

Enrollment in the NHSN and 

completion of the required training 

during the performance period (as 

verified by a digital certificate obtained 

from CDC), or, in the case of providers/ 

facilities that have previously enrolled, 

continued enrollment throughout the 

entirety of the performance period; and 

(ii) submission to the NHSN of at least 

three-consecutive months of dialysis 

event data gathered during the 

performance period. 

We proposed to establish the 

achievement performance standard for 

the ICH CAHPS reporting measure as an 

attestation by the provider/facility that 

it successfully administered the ICH 

CHAPS survey during the performance 

period. 

We proposed to establish the 

achievement performance standard for 

the proposed Mineral Metabolism 

reporting measure as whether a 

provider/facility submitted an 

attestation stating that it measured the 

serum calcium and serum phosphorus 

levels of Medicare patients treated by 

the provider/facility at least once within 

the month throughout the duration of 

the performance period. 

As noted above, section 1881(h)(4)(B) 

of the Act provides that the performance 

standards established under section 

1881(4)(A) of the Act must include 

levels of achievement and improvement, 

as determined appropriate by the 

Secretary. We determined that an 

improvement performance standard is 

not appropriate for the proposed 

reporting measures because it is not 

feasible to measure improvement on 

these measures at this time because we 

do not have any existing data we can 

use to compare provider/facility 

performance. 

We also noted that we do not interpret 

section 1881(h)(1)(B) of the Act to 

require that providers/facilities meet or 


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exceed the performance standards we 

establish with respect to each individual 

ESRD QIP measure. Rather, we 

proposed to implement a scoring 

methodology that enables a provider/ 

facility to avoid a payment reduction as 

long as it achieves a minimum Total 

Performance Score that, as discussed 

more fully below, is equal to the Total 

Performance Score it would have 

received if it had met the performance 

standards for all of the proposed 

measures. 

Additionally, we noted that, 

beginning in PY 2015, we intend to 

propose to establish floors for 

performance such that performance 

standards would never be lower than 

those set for the previous year, even if 

provider/facility performance fails to 

improve, or even declines, over time. 

We also noted that, although we would 

consider continuing to set the national 

performance rate as the achievement 

and/or improvement performance 

standard, we would also consider 

establishing future performance 

standards that reflect performance goals 

widely recognized by the ESRD medical 

community as demonstrating high 

quality care for ESRD patients, should 

such a consensus be reached. 

ii. Setting Performance Benchmarks and 

Thresholds 

Under the proposed scoring 

methodology for the PY 2014 ESRD QIP, 

a provider’s/facility’s performance on 

each of the finalized clinical measures 

would be determined based on the 

higher of (i) an achievement score or (ii) 

an improvement score. In determining 

the achievement score, we proposed 

that providers/facilities would receive 

points along an achievement range, 

defined as a scale that runs from the 

achievement threshold to the 

benchmark. We proposed to define the 

achievement threshold for each of these 

proposed measures as one standard 

deviation below the achievement 

performance standard for the measure 

(which we proposed to set as the 

national performance rate on the 

measure during the baseline period). We 

stated our belief that this achievement 

threshold will provide an incentive for 

providers/facilities to continuously 

improve their performance while not 

reducing the payments made to 

providers/facilities that score at or 

above the national performance rate. We 

proposed to define the benchmark as the 

mean of the top decile of provider/ 

facility performance during the baseline 

period because it represents a 

demonstrably high but achievable 

standard of excellence that the best 

performing providers/facilities reached 

during the baseline period. 

In determining an improvement score 

for the clinical measures, we proposed 

that providers/facilities would receive 

points along an improvement range, 

defined as a scale running between the 

provider’s/facility’s performance on the 

measure (the improvement threshold) 

during the twelve-month baseline 

period and the benchmark. The 

provider/facility’s improvement score 

would be calculated by comparing its 

performance on the measure during the 

performance period (CY 2012) to its 

performance on the measure during the 

baseline period (July 1, 2010–June 30, 

2011). 

iii. Scoring Provider and Facility 

Performance on Clinical Measures 

Based on Achievement 

We proposed to award between 0 and 

10 points for achievement for all of the 

clinical measures except the VAT 

measure based on where a provider’s/ 

facility’s performance falls relative to 

the achievement threshold and the 

benchmark for that measure. The 

following formula is used when the 

provider’s/facility’s performance rate is 

equal to or greater than the achievement 

threshold (but below the benchmark). 

Using this formula, a provider/facility 

would receive a score of 1 to 9 points 

based on a linear scale disturbing all 

points proportionately between the 

achievement threshold and the 

benchmark so that the interval in 

performance between the score needed 

to receive a given number of 

achievement points and one additional 

achievement point is the same 

throughout the range of performance 

from the achievement threshold to the 

benchmark. 

[9* ((Provider’s performance period 

rate—achievement threshold)/ 

(benchmark—achievement 

threshold))] + .5. 

We proposed that all achievement 

points would be rounded to the nearest 

integer, with 0.5 rounded up). If a 

provider’s/facility’s score was: 

• Equal to or greater than the 

benchmark, the provider/facility would 

receive 10 points for achievement 

• Less than the achievement 

threshold (that is, the lower bound of 

the achievement range), the provider/ 

facility would receive 0 points for 

achievement. 

iv. Scoring Provider/Facility 

Performance on Clinical Measures 

Based on Improvement 

We proposed that providers/facilities 

would earn between 0 and 9 points for 

all of the clinical measures except the 

VAT measure based on how much their 

performance on the measure during the 

performance period improved from their 

performance on the measure during the 

proposed individual facility baseline 

period. A unique improvement range for 

each measure would be established for 

each provider/facility. The following 

formula is used when the provider’s/ 

facility’s performance rate is equal to or 

greater than the improvement threshold 

(but below the benchmark). Using this 

formula, the provider/facility would 

receive a score of 0 to 9 improvement 

points based on equally spaced intervals 

between the improvement threshold and 

the benchmark. 

[10 * ((Provider performance period 

rate—provider baseline period 

rate)/(Benchmark—provider 

baseline period rate))]—.5, where 

the provider performance score falls 

in the range from the provider’s 

baseline period score to the 

benchmark. 

We proposed that all improvement 

points be rounded to the nearest integer, 

with 0.5 rounded up). If a provider’s/ 

facility’s score on the measure during 

the performance period was equal to or 

lower than its baseline period score on 

the measure, the provider/facility would 

receive 0 points for improvement. 

v. Calculating the VAT Measure Score 

We proposed to calculate the VAT 

measure score by first calculating the 

measure rate according to measure 

specifications for each of the two 

measure subcomponents. We proposed 

that these two rates would then be 

converted into separate achievement 

and improvement scores, using the 

above methodology, for each 

subcomponent using achievement and 

improvement ranges specific to each 

subcomponent measure. The higher of 

the achievement or improvement score 

for each measure component would 

then be averaged to produce one overall 

score for the VAT measure. We believe 

that this method of calculating this 

measure stresses the importance of both 

vascular access sub-measures without 

penalizing providers/facilities for two 

similar measures or unduly weighting a 

provider’s/facility’s Total Performance 

Score in favor of VAT measures. 

vi. Calculating the NHSN Dialysis Event 

Reporting Measure, Patient Experience 

Survey Usage Reporting Measure and 

Mineral Metabolism Reporting Measure 

Scores 

We proposed to adopt a different 

scoring methodology for the proposed 

NHSN Dialysis Event reporting measure, 


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Patient Experience Survey Usage 

reporting measure, and Mineral 

Metabolism reporting measure. 

With respect to the proposed NHSN 

Dialysis Event Reporting measure, we 

proposed to assign providers/facilities a 

score of 0, 5, or 10 points as follows: 

• Providers/facilities that enrolled in 

the NHSN during or before the 

performance period, completed the 

required training, and successfully 

reported at least three-consecutive 

months of dialysis event data to the 

NHSN before January 30, 2013, for the 

period of January 1, 2012–December 31, 

2012 would receive 10 points. 

• Providers/facilities that enrolled in 

the NHSN and completed the required 

training during or before the 

performance period, but did not report 

at least 3-consecutive months of dialysis 

event data to the NHSN before January 

30, 2013, for the period January 1, 2012 

through December 31, 2012, would 

receive 5 points. 

• Providers/facilities that failed to 

enroll in the NHSN and/or complete the 

required training during or before the 

proposed performance period would 

receive 0 points. 

We proposed to assign providers/ 

facilities a score of 10 points if they 

attest that they successfully 

administered the ICH CAHPS survey 

during the performance period 

according to the specifications 

referenced above. Providers/facilities 

that did not provide such an attestation 

would receive 0 points. 

We proposed to assign providers/ 

facilities that measured the serum 

calcium and serum phosphorus levels of 

all Medicare ESRD patients treated by 

the provider/facility at least once within 

the month throughout the duration of 

the proposed performance period a 

score of 10 points, while providers/ 

facilities that did not do so would 

receive 0 points. We will measure this 

by requiring a facility to furnish an 

attestation at the end of the performance 

period. Those facilities that do not 

provide this attestation will receive 

0 points. 

vii. Weighting of the PY 2014 ESRD QIP 

Measures and Calculation of the PY 

2014 ESRD QIP Total Performance Score 

Section 1881(h)(3)(A)(iii) of the Act 

provides that the methodology for 

assessing provider/facility total 

performance must include a process to 

weight the performance scores with 

respect to individual measures to reflect 

priorities for quality improvement, such 

as weighting scores to ensure that 

providers and facilities have strong 

incentives to meet or exceed anemia 

management and dialysis adequacy 

performance standards, as determined 

appropriate by the Secretary. 

In determining how to appropriately 

weight the PY 2014 ESRD QIP measures 

for purposes of calculating Total 

Performance Scores, we considered a 

number of criteria. Specifically, we 

considered the number of measures we 

have proposed to include in the PY 

2014 ESRD QIP as well as CMS and 

HHS quality improvement priorities. We 

stated our belief that weighting the 

finalized clinical measures equally will 

incentivize providers/facilities to 

improve and achieve high levels of 

performance across all of the measures, 

resulting in overall improvement in the 

quality of care provided to ESRD 

patients. For these reasons, we proposed 

to assign equal weight to the five 

proposed clinical measures, with those 

equal weights adding up to 90 percent 

of the Total Performance Score. We 

stated our belief that, while the 

reporting measures are valuable, the 

clinical measures measure actual patient 

outcomes and therefore, justify a 

combined weight of 90 percent. We 

proposed that the remaining 10 percent 

of the Total Performance Score would 

be comprised of the proposed reporting 

measures, with each measure weighted 

equally. We recognize that reporting is 

an important component in quality 

improvement, and that this type of 

measure should also be included in the 

ESRD QIP, although at a substantially 

lower weight. 

We also considered whether and how 

we could award a Total Performance 

Score to providers/facilities that do not 

report data on at least eleven cases with 

respect to one or more of the finalized 

clinical measures. As we stated above, 

we proposed that this minimum number 

of cases must be reported with respect 

to each clinical measure in order for the 

provider/facility to receive a score on 

that measure. We stated that because we 

are proposing to adopt additional 

measures, we believe that it is 

appropriate to calculate Total 

Performance Scores for all providers/ 

facilities. In the case of a provider/ 

facility that has sufficient data from the 

performance period, but lacks sufficient 

data from the baseline period, we 

proposed to only calculate its 

achievement score, because it would not 

be possible to calculate its improvement 

score. We believe that this approach is 

necessary to ensure that as many 

providers/facilities receive a score as 

possible. We proposed that the 

combined weight of the clinical 

measures that are scored would still be 

equal to 90 percent of the Total 

Performance Score, but only those 

measures for which providers/facilities 

report a minimum of eleven cases or 

more would be included in determining 

this score, with each such measure 

being weighted equally. We stated our 

belief that this approach achieves that 

goal of including as many providers/ 

facilities as possible, while ensuring the 

reliability of the measure scores. 

Similarly, we proposed to assign 

equal weight to the proposed NHSN 

Dialysis Event reporting measure, 

Patient Experience Survey reporting 

measure, and Mineral Metabolism 

reporting measure, with those equal 

weights adding up to 10 percent of the 

Total Performance Score. Applying the 

proposed weighting criteria to a 

provider/facility that receives a score on 

all of the proposed measures, we 

proposed to calculate the provider/ 

facility Total Performance Score using 

the following formula: 

Total Performance Score = [(.18 * 

Hemoglobin Greater Than 12g/dL 

Measure) + (.18 * Kt/V Dialysis 

Adequacy Measure) + (.18 * 

Vascular Access Type Measure) + 

(.18 * Vascular Access Infection 

Measure) + (.18 * SHR–Admissions 

Measure) + (.0333 * NHSN 

Reporting Measure) + (.0333 * 

Patient Experience Survey 

Reporting Measure) + (.0333 * 

Mineral Metabolism Reporting 

Measure)] * 10. 

We proposed that the Total Performance 

Score be rounded-up to the nearest 

integer (and any individual measure 

values ending in .5 would be roundedup). 

We solicited public comment on the 

proposed performance scoring 

methodology as detailed above. The 

comments we received and our 

responses are summarized below. 

Comment: One commenter urged that 

CMS should give greater weight to those 

measures over which facilities have the 

greatest control and asked for 

clarification of the process that will be 

used to weight measures in future years 

of the ESRD QIP. Another commenter 

suggested that CMS weight measures 

that detect underutilization of services 

more than those that detect 

overutilization. Another commenter 

suggested that CMS weight each 

measure based on its potential to 

improve quality. 

Response: We believe, at this time, 

that it is appropriate to weight all of the 

clinical measures equally and all of the 

reporting measures equally in order to 

equally incentivize quality in all of 

these areas of care. Additionally, we 

believe that providers/facilities can, 

overall, impact the outcomes of these 

measures by providing high-quality, 


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patient-centered care in accordance 

with the specified measures. Finally, we 

do not believe it is appropriate to 

penalize underutilization more than 

overutilization. Whether care is 

substandard due to underutilization or 

overutilization, it is still substandard 

care and should be recognized as such. 

We seek to be as transparent as possible 

in all aspects of the ESRD QIP, and we 

will outline the weighting methodology 

for future years of the program through 

rulemaking. 

Comment: Several commenters argued 

that the clinical measures should not be 

weighted equally. Some commenters 

suggested that the VAT catheter 

submeasure comprise a larger weight in 

the final VAT measure score because of 

the literature suggesting that a reduction 

in catheters will also reduce infections 

and mortality. One commenter voiced 

support for CMS’ proposal that the 

clinical measures compose 90 percent of 

the Total Performance Score, but argued 

that, because of the importance of 

vascular access to overall health and 

cost reduction, the VAT measure should 

be weighted at 50 percent with the other 

clinical measures comprising the 

equally weighted remainder of the 

clinical measure score. One commenter 

suggested that CMS weight the VAT 

measure less than the other clinical 

measures. Other commenters suggested 

that, if CMS retains the VAT measure, 

the catheter submeasure be weighted 

greater than the fistula submeasure, 

perhaps at a 2:1 ratio. Some commenters 

also suggested that the Patient 

Experience Survey measure be weighted 

half as much as the other reporting 

measures because of the greater clinical 

impact of the Mineral Metabolism and 

NHSN reporting measures. 

Response: We believe that all of the 

clinical measures improve care and are 

important to the program. For the 

measures finalized for PY 2014, we do 

not believe any one area of care should 

be promoted over another, and we 

believe that providers/facilities should 

be equally incentivized to achieve high 

standards in all of the areas evaluated 

by the clinical measures. Thus, although 

we have finalized only three of the five 

proposed clinical measures, we still 

believe that is appropriate to evenly 

weight the clinical measures. 

Additionally, we continue to believe 

that the clinical measures are vital to 

improving care and should be weighted 

more substantially than those measures 

which to not score providers/facilities 

based upon actual outcomes. We also 

believe that appropriate VAT is critical 

to ensuring optimal patient outcomes. 

Thus, we do not agree that we should 

weight this measure less than the other 

clinical measures. Furthermore, we do 

not believe it is in the best interest of 

patients to weight the fistula VAT 

submeasure more than the catheter VAT 

submeasure because of our goal to 

promote fistula use. Although we agree 

that catheters pose a greater risk to 

patients, we do not believe this 

necessitates weighting the catheter 

subcomponent measure twice as much 

as the AV fistula subcomponent 

measure as both are equally important 

in promoting the best clinical practices 

with respect to VAT. Therefore, as 

stated below, we finalize that the three 

clinical measures will be weighted 

equally to comprise 90 percent of a 

providers/facilities Total Performance 

Score. 

As we have also stated, we believe 

that the Patient Experience Survey is 

one of the most important tools in 

impacting clinical practices because it is 

the only measure that gives patients a 

voice that may otherwise go 

unrecognized. Therefore, we do not 

believe the ICH CAHPS measure should 

have a lesser weight than the other 

reporting measures. 

Comment: One commenter expressed 

concern that new facilities without a 

complete data set available for the 

measures will be unfairly penalized. 

Response: Like all ESRD QIP 

providers/facilities, new facilities will 

only be included in the program if they 

have the requisite amount of data. For 

each of the clinical measures, there 

must be at least eleven cases each with 

four claims, regardless of whether the 

facility is new or established, in order 

for such measure to be included in the 

Total Performance Score. For the 

reporting measures, however, we 

acknowledge that we did not specify 

any data requirements, and we 

recognize that new facilities may be 

unfairly penalized if they do not have a 

sufficient amount of time to fulfill the 

requirements for the reporting measure. 

Accordingly, we finalize that a 

provider/facility that receives a new 

CCN on or after July 1, 2012 will have 

the option to not be scored on the 

reporting measures. We believe that 

these new providers/facilities need a 

reasonable amount of time to put the 

necessary infrastrucure into place in 

order to be able to satisfy these 

measures. For example, with respect to 

the ICH CAHPS patient survey 

experience measure, a new facility 

would need to, at a minimum, hire a 

third party vendor, treat at least one incenter hemodialysis patient for 3 

months, and field the survey (which, 

depending on the responsiveness of the 

patient, could take an additional period 

of months). For these new providers/ 

facilities, that do not successfully satisfy 

the requirements for the reporting 

measures, their Total Performance Score 

will be calculated based solely on the 

applicable clinical measures that apply 

to them. 

However, we also recognize that 

under our scoring methodology, a 

provider/facility’s score on a reporting 

measure could help it achieve the 

minimum Total Performance Score 

needed to avoid a payment reduction 

that it would otherwise receive based 

solely on its clinical measure score(s). In 

order to balance these competing 

concerns, we will allow a new provider/ 

facility (defined above as one that 

receives a new CCN on or after July 1, 

2012) the option to report one or more 

of the reporting measures. If the new 

provider/facility chooses to take 

advantage of this option by successfully 

satisfying the reporting requirement for 

one or more of these measures, we will 

score the new provider/facility on those 

measures and include those scores in 

the calculation of that provider/facility’s 

Total Performance Score. 

We believe that we should include as 

many providers/facilities in the program 

as possible. In the proposed rule, we 

proposed to calculate Total Performance 

Scores for all providers/facilities and 

did not specifically state any minimum 

number of clinical and reporting 

measures a provider/facility would need 

to receive a Total Performance Score. 

Thus, we clarify in this final rule that 

a provider/facility will receive a Total 

Performance Score for PY 2014 if it is 

eligible for at least one measure. We 

finalize that, if a provider/facility is 

eligible for at least one clinical measure 

and at least one reporting measure, the 

clinical measures will be equally 

weighted to sum 90 percent of the Total 

Performance Score, and the reporting 

measures will be equally weighted to 

sum 10 percent of the Total Performance 

Score. If a provider/facility is only 

eligible for clinical but not reporting 

measures or vice versa, we will compute 

its Total Performance Score based solely 

on the measures for which it is eligible. 

Comment: Some commenters 

commended CMS for proposing 

measures, proposing timeframes, and 

proposing the weight each measure 

would have in the PY 2014 program 

within one regulation. 

Response: We thank commenters for 

their support. 

Comment: Commenters noted that 

establishing the achievement threshold 

as one standard deviation below the 

national performance rate might lead to 

inappropriate achievement thresholds 

as a result of skewed performance 

distributions. Some commenters 


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suggested that, instead, CMS base 

performance standards on the median 

performance of providers/facilities, with 

the achievement threshold being at the 

15th percentile. Other commenters 

urged CMS to establish the achievement 

threshold as the mean performance of 

facilities performing in the lowest third. 

Response: In the proposed rule, we 

defined the performance standards as 

the national performance rate, the 

achievement threshold as one standard 

deviation below the achievement 

threshold, and the benchmark as the 

mean of the top decile of providers/ 

facilities. After receiving public 

comment, we have found that the 

distribution of facility performance on 

several measures is skewed, we have 

determined that the median is a better 

measure of central tendency, which was 

our original intent for these standards. 

If the measures had had a more even 

distribution, one standard deviation 

below the mean would have been 

calculated to be at approximately 35 

percentage points below the mean or the 

15th percentile. Thus, we agree with the 

commenters who suggested that the 

performance standard should be set at 

the median performance of providers/ 

facilities during the baseline period. In 

order to more accurately access the 

achievement threshold, we will set the 

performance standards (both 

achievement and improvement) as the 

median of facility/provider performance 

and establish the achievement threshold 

at the 15th percentile because the 15th 

percentile represents approximately one 

standard deviation below the median 

had the distributions been even. 

Comment: Several commenters argued 

that the performance standards must be 

published and commenters must be 

allowed to comment on these standards 

and the related scoring methodology 

before the beginning of the performance 

period. 

Response: Our proposal set forth the 

performance standards that would apply 

to the PY 2014 clinical measures and 

assigned example numerical values to 

each of those proposed measures using 

data from July 1, 2010 through 

November 30, 2010, which was the most 

current data that was available at the 

time that overlapped with the proposed 

performance period. Because of data 

limitations related to the claims 

verification process which allows 

providers/facilities a period of time to 

review and contest claims, we are able 

in this final rule to finalize the 

performance standards that will apply 

to the PY 2014 ESRD QIP but cannot yet 

assign actual numbers to those finalized 

standards based on a full year of data. 

However, we will post these numbers 

on the following Web site: http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/UpdatedBaseline2014-FR.pdf. We are publishing in this 

final rule numbers based on data from 

July 1, 2010 through March 30, 2011, or 

nine of the 12 months of baseline data. 

We will publish numbers based on 12 

months, July 1, 2010 through June 30, 

2011, on or before January 31, 2012 at 

the following Web site: http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/UpdatedBaseline2014-FR.pdf. We do not anticipate that 

the final numbers will differ 

substantially from these numbers. 

We believe that this approach 

complies with section 1881(h)(4) of the 

Act, including the requirement in 

subparagraph (C) that the Secretary 

establish performance standards under 

subparagraph (A) prior to the beginning 

of the performance period. However, we 

recognize that providers/facilities are 

very interested in these numbers and 

have a legitimate need to learn what 

they will be with respect to a payment 

year as soon as possible. Although we 

are not able to provide them in this final 

rule for the reasons discussed above, we 

anticipate that beginning with the PY 

2015 ESRD QIP, we will be able to select 

a baseline period that ends early enough 

to make these numbers available in the 

final rule that applies to that program. 

The estimated actual values that apply 

to the PY 2014 performance standards, 

based on nine of the twelve months of 

baseline data, are shown in Table 5 

below. 

Comment: One commenter suggested 

that CMS modify the payment reduction 

scale to encourage providers to perform 

well on all of the measures. 

Response: As we noted in the 

proposed rule, we do not interpret 

section 1881(h)(1)(B) of the Act to 

require that providers/facilities meet or 

exceed the performance standards we 

establish with respect to each individual 

ESRD QIP measure. Rather, we believe 

that our proposed approach best 

balances the goal of incentivizing 

providers/facilities to provide quality 

care across all of the measures while 

still recognizing the higher quality of 

care provided by those providers/ 

facilities that exceed the performance 

standards on certain measures. 

Additionally, we believe that this 

approach will give providers/facilities 

the flexibility they need to become 

familiar with the new scoring 

methodology. 

Comment: Several commenters 

commended CMS for recognizing both 

achievement and improvement in its 

scoring methodology. Some commenters 

suggested that CMS implement a 

methodology to ensure that 

improvement standards do not diminish 

incentives for achievement (for 

example, facilities should be required to 

meet minimum thresholds prior to 

having improvement rewarded). 

Commenters noted that CMS should 

adjust its scoring methodology to ensure 

that facilities performing consistently 

above the achievement threshold are not 

penalized. Under the proposed scoring 

system, these facilities would not be 

eligible for improvement points and 

could perform worse in the long run 

than those who performed less well in 

baseline years. These commenters 

suggested that CMS establish a 

consistency multiplier. Another 

commenter proposed that CMS set a 

fixed achievement threshold in order to 

prevent penalizing facilities that have 

improved (that is, improvement will 

raise the standard which will cause the 

achievement threshold to rise which 

will cause the provider to have to 

improve more). One commenter stated 

that the performance standards for both 

PY 2013 and PY 2014 should be less 

stringent to decrease the incentive to 

game the system. 

Response: We believe that the scoring 

methodology we are finalizing for the 

PY 2014 ESRD QIP provides appropriate 

incentives to providers/facilities to both 

achieve and improve. We acknowledge 

that under the methodology, it might be 

possible for a provider/facility to attain 

a lower measure rate on one or more 

measures than the measure rate attained 

by other providers/facilities but receive 

more points overall in the form of 

improvement points. However, we 

believe it is appropriate to incentivize 

lower-achieving facilities to continue to 

improve, even if their measure rates do 

not meet the achievement threshold and 

even if their improvement points would 

be higher than their achievement points. 

For these providers/facilities, our 

scoring methodology allows us to 

reduce the amount of a payment 

reduction that they might otherwise 

receive because they have improved 

over their baseline rates. Additionally, 

because providers/facilities can score 1– 

10 points for achievement and only 0– 

9 points for improvement, providers/ 

facilities can always be rewarded more 

for achieving at higher levels. We agree 

with the commenters that the 

performance standard will likely 

continue to rise if we continue to utilize 

this scoring methodology in future 

years, and we will take these comments 

into consideration as we gain 

experience with the ESRD QIP. 

Additionally, we do not believe that 

the performance standards for PY 2013 

or PY 2014 are too stringent. For PY 


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2014, the performance standard is at the 

midpoint of providers’/facilities’ 

performance. Thus, this standard has 

been achieved by half of all facilities. To 

begin scoring achievement points, 

providers/facilities need only be at or 

above the 15th percentile. Thus, we 

believe that the performance standards 

have been and will continue to be 

attainable. We will be monitoring 

outcomes and practice patterns in the 

ESRD setting to determine whether any 

ESRD QIP policies might be encouraging 

activities that could be described as 

‘‘gaming,’’ and, to the extent necessary, 

we will make changes to the ESRD QIP 

to lessen the potential that such 

activities occur. 

Comment: Some commenters 

suggested that there was an error in 

CMS’ proposed scoring methodology 

because, if a facility does not improve 

at all, it is possible for that facility to 

receive a negative improvement score; 

these commenters asked CMS to clarify 

that facilities with the same or lower 

improvement score compared to their 

baseline score will have an 

improvement score of zero. 

Response: Under the proposed scoring 

methodology, scores would be rounded 

to the nearest integer, with a score of 0.5 

rounded up to the next highest integer. 

Accordingly, the lowest improvement 

score a provider/facility could receive is 

(¥) 0.5, and this score would be 

rounded to zero. The commenter is 

correct in that the lowest score a facility 

can receive for both improvement or 

achievement is zero. 

Comment: One commenter expressed 

concern that, by setting the benchmark 

score at the mean of the top decile of 

provider/facility performance, many 

facilities will be unfairly penalized and 

requested that CMS set a benchmark 

closer to the national performance rate. 

Response: As noted, one of the goals 

of the ESRD QIP is to incentivize the 

highest quality care. However, we agree 

that the benchmark should be lowered 

to reflect a more attainable standard, 

and because we are changing the 

achievement threshold to a fixed point, 

we also believe it is appropriate to 

modify our methodology for calculating 

the benchmark. To more accurately 

represent the top of all performers, we 

will calculate the benchmark at the 90th 

percentile instead of as the mean of the 

top decile of performers; while the mean 

of the top decile will vary depending 

upon the rates of the top ten percent of 

performers for each measure, the 90th 

percentile is a fixed place on all 

measure performance distributions, thus 

allowing a more consistent calculation 

throughout various distributions for all 

measures. We believe that this change 

conforms the benchmark to the new 

performance standards and achievement 

threshold while still accomplishing the 

benchmark’s intent to incentivize 

providers/facilities to provide the 

highest achievable level of care. 

For the reasons discussed above, we 

are finalizing the PY 2014 ESRD QIP 

scoring methodology to score each 

clinical measure rate as the higher of the 

measure’s achievement or improvement 

score, as explained above. We are also 

finalizing the proposed scoring 

methodology for calculating the 

reporting measure scores and the 

requirement that a provider/facility 

must have received a CCN on or before 

July 1, 2012 in order to automatically be 

scored on the reporting measures. We 

note that, as discussed above, for the 

NHSN Dialysis Event measure, we will 

now allow providers/facilities until 

March 31, 2013 at 11:59 EST to report 

the required three consecutive months 

of data from the performance period. We 

are also finalizing our proposal to 

calculate the VAT measure score as the 

average of the submeasure scores. 

Based on public comments, we are 

not finalizing the proposed definition of 

performance standards, achievement 

thresholds, or benchmarks which were 

based on means and standard 

deviations. Due to skewed distributions 

of facility performance, we are finalizing 

the performance standards (both 

achievement and improvement) as the 

median (50th percentile), the 

achievement threshold as the 15th 

percentile, and the benchmark as the 

90th percentile. We agree with 

commenters that this better reflects the 

central tendency and spread of these 

performance distributions. 

We are finalizing the proposed 

baseline period of July 1, 2010–June 30, 

2011. We are also finalizing our 

proposal that providers/facilities that do 

not have enough data in the baseline 

period to calculate a rate for a measure 

but do have enough data to calculate a 

measure rate in the performance period 

will receive a score on that measure 

based solely on achievement. We also 

finalize that the clinical measures for 

which a provider/facility is eligible will 

be equally weighted to comprise 90 

percent of its Total Performance Score, 

and the reporting measures for which a 

provider/facility is eligible will be 

equally weighted to comprise 10 percent 

of its Total Performance Score. If a 

provider/facility is only eligible for one 

type of measure, the provider’s/facility’s 

Total Performance Score will be 

calculated based on that measure(s) 

alone. 

Because of the data limitations 

explained above, we are unable at this 

time to assign final numbers to the 

performance standards, achievement 

thresholds, and benchmarks. We will 

publish these numbers at the following 

Web site: http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/UpdatedBaseline2014-FR.pdf on or before January 31, 

2012. Below, in Table 4 and 5, we have 

provided estimates based upon data 

from July 1, 2010 through March 30, 

2011. We do not believe that these 

estimates will vary significantly from 

our finalized numbers. 

BILLING CODE 4120–01–P 


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BILLING CODE 4120–01–C 

vii. Examples for 2014 ESRD QIP 

Performance Scoring Model 

Below, we provide examples to 

illustrate the performance scoring 

model. Figures 1–4 illustrate the scoring 

for a clinical measure. Figure 1 shows 

Facility A’s performance on the URR 

measure. The example benchmark (90th 

percentile) calculated for this measure 

in this case is 100 percent, while the 

example achievement threshold (15th 

percentile) is 91 percent. Facility A’s 

performance rate of 100 percent during 

the performance period meets or 

exceeds the benchmark, so Facility A 

would earn 10 points (the maximum) for 

achievement for this measure. (Because, 

in this example, Facility A has earned 

the maximum number of points possible 

for this measure, its improvement score 

is irrelevant.) 


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Figure 2 and 3 show the scoring for 

another facility, Facility B. As 

illustrated below, the facility’s 

performance on the URR measure went 

from 80 percent in the baseline period 

to 95 percent during the performance 

period. 

Applying the achievement scale, 

Facility B would earn 5 points for 

achievement, calculated as follows: 

9 * [(95 ¥ 91)/(100 ¥ 91)] + .5 = 4.5, 

which is rounded to 5 points. 

However, because Facility B’s 

performance during the performance 

period is also greater than its baseline 

period performance (but Facility B’s 

performance period score is less than 

the benchmark), it would be scored 

based on improvement as well, as 

shown by Figure 3, below. 


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Applying the improvement scale, based 

on Facility B’s period-to-period 

improvement, from 80 percent to 95 

percent, Facility B would earn 7 

improvement points, calculated as 

follows: 

10 * [(95 ¥ 80)/(100 ¥ 80)] ¥ .5 = 7.5 

¥ .5 = 7.0, which would be 

rounded to 7 points. 

Because the higher of the two scores is 

used for determining the measure 

score, Facility B would receive 7 

points for this measure. 

In Figure 4 below, Facility C’s 

performance on the URR measure drops 

from 80 percent in the baseline period 

to 75 percent in the performance period, 

a decline of 5 percent. 


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18This could occur, for example, if a provider/ 

facility is a pediatric and/or peritoneal facility only. 

Because Facility C’s performance 

during the performance period falls 

below the achievement threshold of 91 

percent, it would receive zero points for 

achievement. Facility C would also 

receive zero points for improvement 

because its performance during the 

performance period was lower than its 

performance during the baseline period. 

In this example, Facility C would 

receive zero points for the URR 

Measure. 

The method illustrated above would 

be applied to each clinical measure in 

order to obtain a score for each measure. 

Scores for reporting measures are 

calculated based upon the methodology 

as proposed. 

Applying the weighting criteria to a 

provider/facility that receives a score on 

all finalized measures, we calculate the 

provider’s/facility’s Total Performance 

Score using the following formula: 

Total Performance Score = [(.300 * 

Hemoglobin Greater Than 12g/dL 

Measure) + (.300 * URR 

Hemodialysis Adequacy Measure) + 

(.300 * Vascular Access Type 

Measure) + (.0333 * NHSN 

Reporting Measure) + (.0333 * 

Patient Experience Survey 

Reporting Measure) + (.0333 * 

Mineral Metabolism Reporting 

Measure)] * 10. 

The Total Performance Score be 

rounded to the nearest integer (and 

any individual measure values 

ending in .5 would be rounded to 

the next higher integer)). 

However, if, for example, a provider/ 

facility did not receive a score on the 

proposed VAT measure, the provider’s/ 

facility’s Total Performance Score 

would be calculated as follows: 

Total Performance Score = [(.4500 * 

Hemoglobin Greater Than 12g/dL 

Measure) + (.4500 * URR 

Hemodialysis Adequacy Measure) + 

(.0333 * NHSN Reporting Measure) 

+ (.0333 * Patient Experience 

Survey Reporting Measure) + (.0333 

* Mineral Metabolism Reporting 

Measure)] * 10, (the Total 

Performance Score will be rounded 

to the nearest integer (and any 

values ending in .5 would be 

rounded to the next higher integer)). 

Finally, if, for example, a provider/ 

facility qualified for two of the reporting 

measures,18 the provider’s/facility’s 

Total Performance Score would be 

calculated as follows: 

Total Performance Score = [(.300 * 

Hemoglobin Greater Than 12g/dL 

Measure) + (.300 * URR 

Hemodialysis Adequacy Measure) + 

(.300 * Vascular Access Type 

Measure) + (.05 * NHSN Reporting 

Measure) + (.05 * Mineral 

Metabolism Reporting Measure)] * 

10. 

6. Payment Reductions for the PY 2014 

ESRD QIP 

Section 1881(h)(3)(A)(ii) of the Act 

requires the Secretary to ensure that the 

application of the scoring methodology 

results in an appropriate distribution of 

payment reductions across providers 

and facilities such that providers and 

facilities achieving the lowest Total 

Performance Scores receive the largest 

payment reductions. We have adopted a 

sliding scale of payment reductions for 

the PY 2012 ESRD QIP (76 FR 634) and 

have finalized a sliding scale in this 

final rule for PY 2013 ESRD QIP. In 

developing a payment reduction scale 

for the PY 2014 ESRD QIP, we sought 

to create an approach that would retain 

aspects of the tiered sliding scale 

selected for the PY 2012 ESRD QIP, but 

also reflect the change in provider/ 

facility scores under the new scoring 

methodology. Under the proposed 

approach, a provider/facility would not 

be required to meet or exceed the 

performance standards with respect to 

each of the finalized measures in order 

to avoid receiving a payment reduction 

under the ESRD QIP. Rather, even if a 

provider/facility failed to meet or 

exceed the performance standards with 

respect to one or more of these 

measures, the provider/facility could 

avoid a payment reduction if it achieved 

a minimum Total Performance Score 

that is equal to or greater than the 

minimum Total Performance Score it 

would receive if it had met the 

performance standards for each 

finalized measure, or, in the case of the 

VAT measure, for the two 

subcomponent measures. At the time we 

issued the proposed rule, we were 

unable to calculate the minimum Total 

Performance Score because we did not 

have the data for the baseline period. 

We estimated, however, that the 

minimum Total Performance Score that 

a provider/facility would have to 

achieve to avoid a payment reduction 

would be 60 points, and we stated that 

we would specify the exact number in 

the final rule. We proposed to 

implement at least a 1.0 percent 

payment reduction for all providers/ 

facilities that fail to meet or exceed this 

minimum Total Performance Score. 

To ensure that the proposed payment 

reduction methodology complies with 

the section 1881(h)(3)(A)(ii) requirement 

that providers and facilities achieving 

the lowest Total Performance Scores 

receive the largest payment reductions, 

we proposed to increase the payment 

reduction from 1.0 percent to 1.5 

percent for all providers/facilities that 

fail to achieve a Total Performance 

Score that is 10 points below the 

minimum Total Performance Score 

(described above). Additionally, we 

proposed to increase the payment 

reduction to 2.0 percent for all 

providers/facilities that fail to achieve a 

Total Performance Score that is 20 

points below the minimum Total 

Performance Score (described above). 

We stated our belief that such a sliding 

scale will incentivize providers/ 

facilities to meet the performance 

standards and continue to improve their 

performance because even if a provider/ 

facility fails to achieve the minimum 

Total Performance Score, such provider/ 

facility will still be incentivized to 

strive for, and attain, better performance 

in order to reduce the amount of its 

payment reduction. 

The comments we received on the 

proposed payment reductions are set 

forth below. 

Comment: One commenter opposed 

the elimination of the 0.5% payment 

reduction level and suggested that there 

be at least five tiers in the payment 

reduction scale because, in addition to 

allowing comparisons between years, 

five-tiers in the payment reduction scale 

is more consistent with the literature 

supporting value-based purchasing 

programs. 

Response: We agree with the 

commenter’s concern and will include 

the 0.5 percent payment reduction level 

as an additional level in the PY 2014 

ESRD QIP payment reduction scale. 

Thus, the payment reductions for PY 

2014 will range on a sliding scale from 

0.5 percent to 2.0 percent with the 

provider/facility moving down a tier for 

every ten points its Total Performance 

Score falls below the minimum Total 

Performance Score. We are finalizing 

new measures, a new scoring 

methodology, and rigorous performance 

standards which are not familiar to the 

community. We believe that including 

this additional payment reduction level 

will allow time for us as well as 

providers/facilities to become familiar 

with this new structure. 

Comment: One commenter 

disapproved of setting 10 points as a 

threshold for each reduction in payment 

for PY 2014 when CMS cannot yet 

estimate the minimum Total 

Performance Score because the 

distribution in payment reductions is 

not yet known and will not be known 

until the performance period has ended. 

Instead, the commenter suggested that 

CMS allow for a sufficient period of 


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time for the quality measure scores to be 

made publicly available and data to be 

collected to assess the potential impact 

of the QIP on the facilities. Another 

commenter suggested that CMS score 

the PY 2014 measures on a 30 point 

scale consistent with PY 2012 so that 

facilities and consumers can 

meaningfully compare performance 

from year to year. 

Response: We appreciate the 

commenter’s concern regarding how we 

establish the minimum Total 

Performance Score and each successive 

payment reduction level. Although we 

will not know the distribution of 

payment reductions based on the 

minimum Total Performance Score until 

we have the data at the end of the 

performance period, given our current 

estimates of the data, we believe that, 

the payment reductions will be 

appropriate to incentivize providers/ 

facilities to improve patient care. We 

have calculated these estimates based 

on the data currently available to us, as 

further explained in the Regulatory 

Impact Statement, and they are similar 

to the reductions for PY 2012 and our 

estimates for PY 2013. However, in light 

of the commenter’s concern, we will 

further adjust how we set the minimum 

Total Performance Score. Rather than 

set the minimum Total Performance 

Score as the score a provider/facility 

would receive if it had met the 

performance standards for each 

finalized measure, we will define the 

minimum Total Performance Score as 

the score a provider/facility would 

receive if it had met the performance 

standards for each of the finalized 

clinical measures. Recognizing many 

commenters’ concerns regarding the 

new reporting measures, and our lack of 

data on which to approximate likely 

provider/facility performance, we will 

exclude them from the calculation of the 

minimum Total Performance Score. We 

believe this policy will balance our 

desire to appropriately incentivize 

improvements in clinical quality while 

ensuring that providers/facilities are not 

unduly penalized. 

Based on our analysis of the data from 

July 1, 2010 through March 30, 2011, we 

estimate that the PY 2014 minimum 

Total Performance Score will be 56 

points. We will publish the final 

minimum Total Performance Score at 

the following Web site: http:// 

www.dialysisreports.org/pdf/esrd/ 

public-measures/UpdatedBaseline2014–FR.pdf on or before January 31, 

2012. 

Additionally, although we generally 

believe that the ESRD QIP should 

provide a means for patients to evaluate 

their providers/facilities over time, we 

do not believe that, even if we set 

performance on a 30 point scale, PY 

2014 would be comparable to previous 

years of the ESRD QIP because of the 

significant changes to scoring 

methodology and measures. We believe 

a 100 point scale will accommodate a 

growing number of measures that may 

be adopted in future years of the QIP 

and plan to consistently use the 100 

point scale going forward. 

Based on the public comments we 

received, we are finalizing most of the 

payment reduction methodology that we 

proposed; however, we are adding an 

additional payment reduction level of 

0.5 percent, with the scale now ranging 

from 0.5 percent to 2.0 percent. For 

every ten points a provider/facility’s 

Total Performance Score falls below the 

minimum Total Performance Score, it 

will receive an additional 0.5 percent 

reduction. We are modifying our 

definition of the minimum Total 

Performance Score to be equal to the 

score a provider/facility would receive 

if it performed at the performance 

standards for each of the clinical 

measures. 

As noted above, we are unable to 

publish a finalized minimum Total 

Performance Score until we assign a 

final number to each finalized 

performance standard. We will publish 

a finalized minimum Total Performance 

Score at the following Web site: 

http://www.dialysisreports.org/pdf/esrd/ 

public-measures/UpdatedBaseline2014–FR.pdf on or before January 31, 

2012. Based upon the performance 

standard examples we provided above, 

we estimate that the minimum Total 

Performance Score will be 56. We do 

not anticipate that this estimate will 

substantially change. Using this 

estimation, the payment reduction scale 

would be as detailed below in 

7. Public Reporting Requirements 

Section 1881(h)(6)(A) of the Act 

requires the Secretary to establish 

procedures for making information 

regarding performance under the ESRD 

QIP available to the public, including 

information on the Total Performance 

Score (as well as appropriate 

comparisons of providers and facilities 

to the national average with respect to 

such scores) and performance scores for 

individual measures achieved by each 

provider and facility. Section 

1881(h)(6)(B) of the Act further requires 

that a provider or facility have an 

opportunity to review the information to 

be made public with respect to that 

provider/facility prior to such 

information’s publication. 

In addition, section 1881(h)(6)(C) of 

the Act requires the Secretary to provide 

each provider and facility with a 

certificate containing its Total 

Performance Score to post in patient 

areas within the facility. Finally, section 

1881(h)(6)(D) of the Act requires the 

Secretary to post a list of providers/ 

facilities and performance-score data on 

a CMS-maintained Web site. 

For both the PY 2013 and PY 2014 

ESRD QIP, we proposed no change in 

the implementation of these statutory 

provisions (section 1881(h)(6)(A) 

through section 1881(h)(6)(D) of the Act) 

from the proposals finalized in the 2012 

ESRD QIP final rule (76 FR 636 through 

639), wherein we finalized the 

establishment of procedures for 

providers/facilities to review the 

information to be made public and the 

procedures for informing the public 

through facility-posted certificates. 


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The comments we received on the 

public reporting proposals are set forth 

below. 

Comment: Some commenters noted 

that information reported to the public 

should be meaningful and requested 

that CMS include language on the ESRD 

QIP certificates stating (i) The date range 

of the performance period; (ii) the date 

ranges used to compute the performance 

standards; and (iii) a statement that the 

data may not reflect current medical 

standards or facility/provider 

performance. 

Response: The certificates for PY 2012 

will indicate the year of the 

performance period. We will monitor 

whether beneficiaries find the 

certificates to be effective in conveying 

performance, and we will continue to 

evaluate the information they should 

include for PY 2013 and PY 2014. We 

believe that the intent of the certificates 

is to convey information about facility 

performance in an understandable, 

clear, and concise manner. We do not 

believe that details about the baseline 

data used to compute the performance 

standards, or disclaimers about the 

limitations of the data, are required to 

convey this basic message, but we 

encourage providers/facilities to discuss 

these certificates with their patients and 

provide any further explanatory 

information they feel is necessary. 

Comment: Several comments 

requested that CMS address procedural 

issues related to facility Performance 

Score Reports. 

Response: Performance Score Reports 

(PSRs) are distributed to providers/ 

facilities for their review after the end 

of the performance period but before 

payment reductions are assessed. For 

PY 2012, PSRs were sent to providers/ 

facilities in July 2011, and provider/ 

facilities were permitted to preview the 

reports and ask us any questions. We are 

currently reviewing our PSR process, 

and we will consider commenters’ 

suggestions as we develop the PSRs for 

PY 2013 and PY 2014. 

For the reasons set forth above, we are 

finalizing the public reporting 

requirements as proposed. 

8. Future QIP Measures 

As part of our effort to continuously 

improve the ESRD QIP, we are working 

to adopt additional robust measures that 

provide valid assessments of the quality 

of care delivered to ESRD beneficiaries. 

To that end, we are developing 

measures that apply to all modalities 

(including home and in-center dialysis) 

and the pediatric population. We also 

sought public comment on the inclusion 

of iron management measures, serum 

calcium management measures, and 

serum phosphorus management 

measures for future years of the ESRD 

QIP. Specifically, we sought public 

comment on: 

• Measurement of Serum Calcium 

Concentration. 

• Measurement of Serum Phosphorus 

Concentration. 

• Assessment of Iron Stores. 

These measures are currently 

collected through CROWNWeb as part 

of the CPM set. The full specifications 

for these measures may be accessed at: 

http://www.dialysisreports.org/ 

ESRDMeasures.aspx. 

The comments we received on future 

measures are set forth below. 

Comment: Many commenters 

suggested measures and/or domains for 

future ESRD QIP payment years. These 

suggestions included (i) Iron measures, 

perhaps measuring trends in ferritin; (ii) 

upper serum phosphorus limit 

measures; (iii) hypercalcemia measures 

(e.g. NQF #1454); (iv) PTH measures; 

(iv) albumin measures; (v) 

immunization measures; (vi) fluid 

management measures; (vii) quality of 

life measures; (x) measures focusing 

upon the nurse-patient relationship; 

(viii) measures assessing the number of 

HHD and PD patients; (ix) blood 

pressure measures; and (x) standardized 

mortality rate measures. Other 

commenters suggested that we make the 

reporting measures clinical measures as 

soon as feasible. Commenters also 

encouraged us to consider domains and 

measures in which the pediatric 

community, HHD patients, and PD 

patients can more actively participate. 

Response: We thank commenters for 

these suggestions. We continue to 

monitor measure development and valid 

and available data sources and look 

forward to working with the ESRD 

community to choose future measures 

which drive quality of care. 

Comment: One commenter stated a 

belief that that CMS should not adopt 

any current or future measures that do 

not indicate a causal relationship 

between the measure and morbidity and 

mortality and requested that CMS 

conduct more scientific tests on these 

measures. Therefore, this commenter 

believes that an iron stores measure 

should be a reporting measure only 

until further scientific evidence can be 

obtained. This commenter also 

expressed concern that a ‘‘one size fits 

all’’ system will lead to ‘‘cherrypicking.’’ 

Response: We thank the commenter 

for the input. We continue to analyze 

and develop measures that we believe 

best reflect quality in care. We also 

continue to monitor access to care 

issues and will adjust the ESRD QIP to 

address these issues in future 

rulemaking, as needed. 

Comment: One commenter suggested 

that the ESRD QIP should focus more on 

mitigating patient non-compliance. 

Response: We thank the commenter 

for the suggestion and will consider it 

as we further develop measures and 

policies for the ESRD QIP. We also note 

that there are mechanisms currently in 

place under the ESRD Conditions for 

Coverage that require that providers/ 

facilities educate patients and promote 

appropriate patient care (e.g. 42 CFR 

494.90(d)). 

Comment: Some commenters urged 

CMS to require reporting of the ESRD 

QIP measures for all applicable patient 

populations, including both Medicare 

and non-Medicare populations, because 

providers will then have a better 

understanding of their overall 

performance. 

Response: We intend to propose to 

require reporting of measure data on all 

ESRD patient populations after the 

launch of CROWNWeb. We have thus 

far not required reporting on all patient 

populations because our measures have 

been claims-based and have thus been 

restricted to Medicare patients. We 

adopted claims-based measures to 

reduce the burden of reporting for 

providers/facilities in the initial years of 

the program. 

Comment: Some commenters 

requested that we clearly provide the 

criteria which we will use to select 

future measures and their weight and 

suggested that measures be ‘‘phased-in.’’ 

Commenters also suggested the CMS use 

criteria similar to that used by the NQF 

to adopt measures and employ the 

feedback of the Measure Applications 

Partnership in selecting measures 

appropriate for the program. 

Response: We believe that we have 

outlined the criteria we used to select 

measures and their weights for the 

ESRD QIP, and we will continue to do 

so in the future. We will also consider 

NQF criteria, as well as feedback of 

other consensus-based entities, such as 

the Measures Application Partnership, 

as we select measures for the ESRD QIP. 

We also believe that, in some cases, it 

might be appropriate to ‘‘phase-in’’ 

measures, and we will continue to 

consider the best methods of 

introducing measures to the program. 

Comment: One commenter suggested 

that CMS impose a method for ensuring 

that the data provided by facilities/ 

providers is accurate. 

Response: We currently have the 

ability to cross check the accuracy of 

some of the data reported via 

CROWNWeb. If a provider/facility 

reports information via CROWNWeb, 


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we can see if this information reflects 

that submitted for the ESRD QIP. We 

will continue to monitor provider/ 

facility compliance with the ESRD QIP 

reporting requirements, and we will 

propose to implement a validation 

methodology in future rulemaking if we 

conclude that this would be appropriate 

for the program. 

Comment: Some commenters 

encouraged CMS to implement a 

program or conduct demonstration 

programs for incentive bonus payments 

rather than payment reductions. These 

commenters suggested that these 

bonuses could be funded by the money 

saved in payment reductions under the 

ESRD QIP. Another commenter 

suggested that CMS make more of the 

payment amount contingent upon 

quality, and one commenter urged CMS 

to encourage innovation in the ESRD 

field. 

Response: Section 1881(h) does not 

provide us with the authority to issue 

bonus payments to providers/facilities 

based on their performance under the 

ESRD QIP or to make reductions of more 

than 2.0 percent. We have conducted 

quality incentive ESRD demonstration 

projects in the past, and we intend to do 

so in the future; we will consider 

commenters’ suggestions as we develop 

future projects. We believe that the 

ESRD QIP will encourage innovation in 

the ESRD field as providers/facilities 

seek to reach the highest quality 

standards through better and more 

efficient methods of care. 

9. Process of Updating Measures 

Section 1881(h)(2)(C) of the Act 

enables the Secretary to establish a 

process for updating the measures 

specified under subparagraph (A) in 

consultation with interested parties. 

Occasionally there are changes in 

science or new issues arise related to 

patient safety that may impact the 

measures that have been adopted 

through the rulemaking process. 

Therefore, for such cases where new 

information is available that specifically 

relates to patient safety concerns, we 

proposed that we would post a notice of 

the updates we intend to make to the 

measure(s) in the Federal Register. We 

proposed to specify in the notice a time 

period during which we would accept 

comments from the public. We also 

proposed to consider these comments 

and post a notice in the Federal Register 

finalizing any updates that we make to 

the measure(s). We stated our belief that 

this process will enable us to make 

necessary updates to the ESRD QIP 

measures to ensure that the measures 

are based on the best available scientific 

data. 

Comment: Some commenters 

requested that CMS use the rulemaking 

process to update and/or modify 

measures. 

Response: We believe that the 

measure updating process that the 

Secretary establishes under section 

1881(h)(2)(B) can be a subregulatory 

process, as long as it is established in 

consultation with interested parties. We 

also believe that we have met this 

statutory requirement by proposing in 

rulemaking to implement a process to 

update measures. Generally, we will use 

the rulemaking process as often as 

possible to updated and/or modify 

measures. But the process we proposed 

to adopt balances our need, in some 

circumstances, to expeditiously update 

measures to address changes in science 

or issues related to patient safety while 

still allowing the public to express its 

critiques, concerns, and approval of 

such updates. 

After considering the comments, we 

are finalizing our process for updating 

measures as proposed. 

III. Ambulance Fee Schedule 

A. Summary of Proposed Provisions 

In the CY 2012 ESRD PPS proposed 

rule (76 FR 40535 through 40536), we 

proposed to revise the regulations at 

§ 414.610 to conform with section 106 of 

the Medicare and Medicaid Extenders 

Act of 2010 (MMEA), and to incorporate 

a technical correction. 

1. Section 106 of the Medicare and 

Medicaid Extenders Act of 2010 

(MMEA) 

a. Amendment to Section 1834(l)(13) of 

the Act 

Section 146(a) of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (Pub. L. 110–275) 

(MIPPA) amended section 

1834(l)(13)(A) of the Act to specify that, 

effective for ground ambulance services 

furnished on or after July 1, 2008 and 

before January 1, 2010, the ambulance 

fee schedule amounts for ground 

ambulance services shall be increased as 

follows: 

For covered ground ambulance 

transports which originate in a rural 

area or in a rural census tract of a 

metropolitan statistical area, the fee 

schedule amounts shall be increased by 

3 percent. 

For covered ground ambulance 

transports which do not originate in a 

rural area or in a rural census tract of 

a metropolitan statistical area, the fee 

schedule amounts shall be increased by 

2 percent. 

Sections 3105(a) and 10311(a) of the 

Affordable Care Act further amended 

section 1834(l)(13)(A) of the Act to 

extend the payment add-ons described 

above for an additional year, such that 

these add-ons also applied to covered 

ground ambulance transports furnished 

on or after January 1, 2010 and before 

January 1, 2011. In the CY 2011 

physician fee schedule final rule (75 FR 

73385 and 73386, 73625), we revised 

§ 414.610(c)(1)(ii) to conform the 

regulations to this statutory 

requirement. 

Subsequently, section 106(a) of the 

MMEA again amended section 

1834(l)(13)(A) of the Act to extend the 

payment add-ons described above for an 

additional year, such that these add-ons 

also apply to covered ground ambulance 

transports furnished on or after January 

1, 2011 and before January 1, 2012. In 

the CY 2012 ESRD PPS proposed rule 

(76 FR 40535), we proposed to revise 

§ 414.610(c)(1)(ii) to conform the 

regulations to this statutory 

requirement. This statutory requirement 

is self-implementing. A plain reading of 

the statute requires only a ministerial 

application of the mandated rate 

increase, and does not require any 

substantive exercise of discretion on the 

part of the Secretary. For further 

information regarding the extension of 

these payment add-ons, please see 

Transmittal 706 (Change Request 6972) 

dated May 21, 2010 and the CMS Web 

site, http://www.cms.gov/

AmbulanceFeeSchedule/02_afspuf.asp. 

b. Amendment to Section 146(b)(1) of 

MIPPA 

Section 146(b)(1) of the MIPPA 

amended the designation of rural areas 

for payment of air ambulance services. 

This section specified that any area that 

was designated as a rural area for 

purposes of making payments under the 

ambulance fee schedule for air 

ambulance services furnished on 

December 31, 2006, shall continue to be 

treated as a rural area for purposes of 

making payments under the ambulance 

fee schedule for air ambulance services 

furnished during the period July 1, 2008 

through December 31, 2009. 

Sections 3105(b) and 10311(b) of the 

Affordable Care Act amended section 

146(b)(1) of MIPPA to extend this 

provision for an additional year, 

through December 31, 2010. In the CY 

2011 physician fee schedule final rule 

(75 FR 73385 through 86, 73625 through 

26), we revised § 414.610(h) to conform 

the regulations to this statutory 

requirement. Subsequently, section 

106(b) of the MMEA amended section 

146(b)(1) of MIPPA to extend this 

provision again through December 31, 

2011. Therefore, in the CY 2012 ESRD 

PPS proposed rule (76 FR 40536), we 


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proposed to revise § 414.610(h) to 

conform the regulations to this statutory 

requirement. This statutory requirement 

is self-implementing. A plain reading of 

the statute requires only a ministerial 

application of a rural indicator, and 

does not require any substantive 

exercise of discretion on the part of the 

Secretary. Accordingly, for areas that 

were designated as rural on December 

31, 2006, and were subsequently redesignated as urban, we have reestablished the ‘‘rural’’ indicator on the 

ZIP Code file for air ambulance services 

through December 31, 2011. 

For further information regarding the 

extension of this MIPPA provision, 

please see Transmittal 706 (Change 

Request 6972) dated May 21, 2010 and 

the CMS Web site, http://www.cms.gov/ 

AmbulanceFeeSchedule/02_afspuf.asp. 

c. Amendment to Section 1834(l)(12) of 

the Act 

Section 414 of the Medicare 

Prescription Drug, Improvement and 

Modernization Act of 2003 (MMA) 

added paragraph (12) to section 1834(l) 

of the Act, which specified that in the 

case of ground ambulance services 

furnished on or after July 1, 2004, and 

before January 1, 2010, for which 

transportation originates in a qualified 

rural area (as described in the statute), 

the Secretary shall provide for a percent 

increase in the base rate of the fee 

schedule for such transports. The statute 

requires this percent increase to be 

based on the Secretary’s estimate of the 

average cost per trip for such services 

(not taking into account mileage) in the 

lowest quartile of all rural county 

populations as compared to the average 

cost per trip for such services (not 

taking into account mileage) in the 

highest quartile of rural county 

populations. Using the methodology 

specified in the July 1, 2004 interim 

final rule (69 FR 40288), we determined 

that this percent increase was equal to 

22.6 percent. As required by the MMA, 

this payment increase was applied to 

ground ambulance transports that 

originated in a ‘‘qualified rural area’’; 

that is, to transports that originated in 

a rural area included in those areas 

comprising the lowest 25th percentile of 

all rural populations arrayed by 

population density. For this purpose, 

rural areas included Goldsmith areas (a 

type of rural census tract). 

Sections 3105(c) and 10311(c) of the 

Affordable Care Act amended section 

1834(l)(12)(A) of the Act to extend this 

rural bonus for an additional year 

through December 31, 2010. In the CY 

2011 physician fee schedule final rule 

(75 FR 73385 through 73386 and 73625), 

we revised § 414.610(c)(5)(ii) to conform 

the regulations to this statutory 

requirement. 

Subsequently, section 106(c) of the 

MMEA again amended section 

1834(l)(12)(A) of the Act to extend the 

rural bonus described above for an 

additional year, through December 31, 

2011. Therefore, as directed by the 

MMEA, we are continuing to apply the 

rural bonus described above (in the 

same manner as in previous years), to 

ground ambulance services with dates 

of service on or after January 1, 2011 

and before January 1, 2012 where 

transportation originates in a qualified 

rural area. 

This rural bonus is sometimes 

referred to as the ‘‘Super Rural Bonus’’ 

and the qualified rural areas (also 

known as ‘‘super rural’’ areas) are 

identified during the claims 

adjudicative process via the use of a 

data field included on the CMS 

supplied ZIP Code File. 

In the CY 2012 ESRD PPS proposed 

rule (76 FR 40536), we proposed to 

revise § 414.610(c)(5)(ii) to conform the 

regulations to the statutory requirement 

set forth at section 106(c) of the MMEA. 

This statutory requirement is selfimplementing. The statute requires a 

one-year extension of the rural bonus 

(which was previously established by 

the Secretary), and does not require any 

substantive exercise of discretion on the 

part of the Secretary. For further 

information regarding the extension of 

this rural bonus, please see Transmittal 

706 (Change Request 6972) dated May 

21, 2010 and the CMS Web site, http:// 

www.cms.gov/AmbulanceFeeSchedule/

02_afspuf.asp. 

2. Technical Correction 

In the CY 2011 physician fee schedule 

final rule (75 FR 73386, 73625), CMS 

made technical changes to reformat 

§ 414.610(c)(1). However, in making 

these revisions, language related to the 

ambulance fee schedule conversion 

factor (CF) was inadvertently left out of 

this regulation. Specifically, the 

following sentence was inadvertently 

omitted from revised § 414.610(c)(l): 

‘‘The CF is multiplied by the applicable 

RVUs for each level of service to 

produce a service-level base rate.’’ Prior 

to the changes made in the CY 2011 

physician fee schedule final rule, this 

was the first sentence under 

§ 414.610(c)(l)(i). We did not intend to 

delete this language in making the CY 

2011 formatting changes. Therefore, in 

the CY 2012 ESRD PPS proposed rule 

(76 FR 40536), we proposed to revise 

§ 414.610(c)(1) to reinstate this sentence 

which was inadvertently deleted in the 

CY 2011 physician fee schedule final 

rule. 

B. Response to Comments 

We did not receive any comments 

regarding the proposed revisions to 

§ 414.610 discussed above. (We received 

one ambulance-related comment during 

the comment period which was beyond 

the scope of the proposed rule, and 

thus, it is not addressed in the final 

rule). Therefore, we are finalizing the 

revisions to § 414.610 as proposed. 

IV. Durable Medical Equipment and 

Supplies 

A. Background for Durable Medical 

Equipment (DME) and Supplies 

Title XVIII of the Social Security Act 

(the Act) governs the administration of 

the Medicare Program. The statute 

provides coverage for broad categories 

of benefits, including inpatient and 

outpatient hospital care, skilled nursing 

facility care, home health care, 

physician services, and durable medical 

equipment (DME). DME is covered by 

Medicare based, in part, upon section 

1832(a) of the Act, which describes the 

scope of benefits under the 

supplementary medical insurance 

program (Medicare Part B). Section 

1861(s)(6) of the Act defines ‘‘medical 

and other health services’’ to include 

DME as a separate benefit for which 

payment is authorized by section 1832 

of the Act. Section 1861(m)(5) of the Act 

specifically includes DME in the 

definition of the term ‘‘home health 

services.’’ 

In accordance with section 1861(n) of 

the Act, the term ‘‘durable medical 

equipment’’ includes iron lungs, oxygen 

tents, hospital beds, and wheelchairs 

used in the patient’s home whether 

furnished on a rental basis or 

purchased. The patient’s home includes 

an institution used as his or her home 

other than an institution that meets the 

requirements of section 1861(e)(1) or 

section 1819(a)(1) of the Act. Besides 

being subject to this provision, the 

coverage of DME must also meet the 

requirements of section 1862(a)(1)(A) of 

the Act, which in general excludes from 

payment any items or services that are 

not reasonable and necessary for the 

diagnosis or treatment of illness or 

injury or to improve the functioning of 

a malformed body member, and section 

1862(a)(6) of the Act, which (except for 

certain specified exceptions) precludes 

payment for personal comfort items. 

Section 1834(a) of the Act, as added 

by section 4062 of the Omnibus Budget 

Reconciliation Act of 1987 (OBRA 87), 

Public Law 100–203, sets forth the 

payment rules for most DME furnished 

on or after January 1, 1989. Historically, 

the Medicare payment amount for a 

DME item is generally equal to 80 


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percent of the lesser of the actual charge 

or the fee schedule amount for the item, 

less any unmet Part B deductible. The 

beneficiary coinsurance for such items 

is generally equal to 20 percent of the 

lesser of the actual charge or the fee 

schedule amount for the item once the 

deductible is met. The fee schedule 

amounts are generally calculated using 

average allowed charges from a base 

period and then updated by annual 

update factors. Sections 1834(a)(2) 

through (a)(7) of the Act set forth six 

separate classes of DME and separate 

payment rules for each class. The six 

classes of items are: inexpensive and 

other routinely purchased DME; items 

requiring frequent and substantial 

servicing; customized items; oxygen and 

oxygen equipment; other covered items 

(other than DME); and capped rental 

items. For DME in general, § 414.210(f) 

specifies that payment can be made for 

replacement of DME that is lost, stolen, 

irreparably damaged, or has been in 

continuous use for the equipment’s 

reasonable useful lifetime (RUL). In 

general, the RUL for DME is established 

as 5 years. Computation of the RUL is 

based on when the equipment is 

delivered to the beneficiary, not the age 

of the equipment. The 5-year standard is 

set forth in section 1834(a)(7)(C)(iii) of 

the Act for capped rental DME, but was 

applied to all DME through the 

regulations. The RUL is used to 

determine how often it is reasonable to 

pay for replacement of DME under the 

program and is not specifically set forth 

as a minimum lifetime standard. 

Therefore, we are using our discretion to 

establish a rule regarding how long 

equipment must withstand repeated use 

to be considered DME. 

Payment for inexpensive or routinely 

purchased DME is made on a purchase 

or rental basis, with total payments 

being limited to the purchase fee 

schedule amount for the item. The 

regulation at 42 CFR 414.220 provides 

that inexpensive DME have an average 

purchase price of $150 or less and 

routinely purchased DME are items that 

have historically been acquired on a 

purchase basis 75 percent of the time or 

more. Accessories used with DME are 

also included in the inexpensive or 

routinely purchased DME class. 

Payment is generally made on a 

monthly rental basis with no cap on the 

number of rental payments made for 

items such as ventilators that require 

frequent and substantial servicing. 

Payment for items meeting the 

definition of customized DME set forth 

at § 414.224 is made on a lump sum 

purchase basis in an amount established 

based on the Medicare claims 

processing contractor’s individual 

consideration and judgment of a 

reasonable payment amount for each 

item. Payment for oxygen equipment set 

forth at § 414.226 is made on a monthly 

basis for up to 36 months of continuous 

use. The supplier retains ownership of 

the oxygen equipment following the 36- 

month cap, but must continue to furnish 

the equipment for the remainder of the 

equipment’s 5-year RUL, at which point 

the beneficiary can elect to obtain new 

equipment. Payment for capped rental 

items set forth at § 414.229(f) is made on 

a monthly rental basis for up to 13 

months of continuous use. The supplier 

must transfer title to the equipment to 

the beneficiary on the first day 

following the 13th month of continuous 

use. 

In establishing regulations for the 

purpose of implementing the payment 

rules mandated by OBRA 87, 42 CFR 

414.202 sets forth the basic definition of 

DME that was originally established and 

elaborated upon in program instructions 

discussed below. Section 414.202 

defines DME as equipment furnished by 

a supplier or a home health agency 

that— 

• Can withstand repeated use; 

• Is primarily and customarily used 

to serve a medical purpose; 

• Generally is not useful to an 

individual in the absence of an illness 

or injury; and 

• Is appropriate for use in the home. 

The benefit for DME as it was initially 

defined at section 1861(s)(6) of the Act 

was a benefit for ‘‘rental of durable 

medical equipment.’’ The owner of 

rented equipment is paid for the use of 

the equipment. When the equipment is 

no longer needed, it is returned to the 

owner and can then be rented by 

another customer. Items that are 

disposable cannot be rented and items 

that last for short periods of time are not 

likely to be items that would be rented. 

The Act was amended by section 16 of 

the Medicare-Medicaid Anti-Fraud and 

Abuse Amendments of 1977 (Pub. L. 

95–142) to allow for purchase of DME 

in cases where purchase is less costly or 

more practical than rental. In 1978, 

program instructions were added to the 

Medicare Part B Carriers Manual 

(HCFA–Pub. 14–3, Rev. 3–669) to 

further define DME and durability of an 

item, that is, when an item is considered 

durable. The instructions are now 

included in section 110.1 of chapter 15 

of the Medicare Benefit Policy Manual 

(CMS–Pub. 100–02). In specifying 

which items satisfy the durability 

criteria, these program instructions 

provide that ‘‘an item is considered 

durable if it can withstand repeated use, 

that is, the type of item which could 

normally be rented’’ and excludes items 

that are ‘‘of an expendable nature.’’ The 

instructions do not specify exactly how 

long an item must last to be considered 

a durable item that would normally be 

rented as opposed to a disposable item 

or an item that would not normally be 

rented. 

CMS has provided program 

instructions for coverage of supplies and 

accessories at Section 110.3 in Chapter 

15 of the Medicare Benefit Policy 

Manual. The instructions provide that 

payment may be made for supplies that 

are necessary for the effective use of 

DME, such as lancets used to draw 

blood for use with a home blood glucose 

monitor. The lancet itself is disposable 

and would not be covered as DME, but 

it is a covered item that falls under the 

general DME benefit because it is 

necessary for the effective use of DME— 

the home blood glucose monitor. 

Supplies necessary for the effective use 

of DME also include oxygen and those 

drugs and biologicals which must be 

inserted directly into the equipment for 

the effective use of DME. 

The Healthcare Common Procedure 

Coding System (HCPCS) is a 

standardized coding system used to 

process claims submitted to Medicare, 

Medicaid, and other health insurance 

programs by providers, physicians, and 

other suppliers. The HCPCS Code Set is 

divided into two principal subsystems, 

referred to as level I and level II of the 

HCPCS: 

Level I of the HCPCS codes is 

comprised of Current Procedural 

Terminology (CPT) codes, which are 

copyrighted by the American Medical 

Association (AMA), and are used 

primarily to identify medical services 

and procedures furnished by physicians 

and other healthcare professionals that 

are billed to public or private health 

insurance programs. 

Level II of HCPCS is a standardized 

coding system used primarily to identify 

products and supplies that are not 

included in the CPT codes, such as 

DME, orthotics, prosthetics, and 

supplies when used outside a 

physician’s office. Assignment of a 

HCPCS code is not a coverage 

determination and does not imply that 

any payer will cover the items in the 

code category. In October 2003, the 

Secretary delegated authority under the 

Health Insurance and Portability Act of 

1996 to CMS to maintain and distribute 

HCPCS Level II codes. 

B. Current Issues 

The regulation and program 

instructions do not lend guidance 

regarding the specific period of time 

that equipment must function in order 


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19The NIPA Handbook (Concepts and Methods of 

the U.S National Income and Product Accounts, 

Chapter 5–Personal Care Expenditures. The 

handbook is available at http://www.bea.gov/

national/pdf/NIPAhandbookch5.pdf. 

20The McGraw Hill Dictionary of Modern 

Economics by Douglas Greenwald & Associates, 

Economics dictionary by Donald Moffat, Dictionary 

of Business and Economics by Christine Ammer 

and Dean Ammer. 

21Encyclopedia of Business, Britannica 

Encyclopedia and Gale Encyclopedia. 

22A Lexicon of Economics by Kenyon A. Knopf. 

23http://resna.org/. 

to be considered ‘‘durable.’’ In addition, 

the regulation does not provide specific 

guidance or criteria regarding how to 

determine if new devices consisting of 

a system of durable and non durable 

components that together serve a 

medical purpose fall within the DME 

benefit category. Therefore, we believe it 

is necessary to revise the regulation at 

this time to include a definition of DME 

that uses more specific language to 

define the term ‘‘durable’’ for the 

purpose of determining whether 

equipment is DME. The issue of linking 

durability to the lifetime of equipment 

and where to draw the line has come to 

our attention in light of the recent 

technology and engineering in the field 

of medical devices and equipment. 

Establishing a minimum lifetime 

requirement (MLR) would help facilitate 

the benefit category determination 

process for items that clearly last longer 

or shorter than the minimum lifetime 

threshold. 

In cases where it is not clear that the 

equipment can function for the 

specified minimum period of time, we 

proposed that reviewing additional 

information and evidence consistent 

with the present benefit category 

determination process would be 

necessary to determine the expected life 

of the equipment. CMS and CMS 

contractors would base the decision on 

various sources of information 

including but not limited to the HCPCS 

request form, pre-market clearance 

documents from the Food and Drug 

Administration (FDA), product warranty 

documents, product Web site, product 

marketing materials, product user 

guides, product operating manuals, 

consumer product reviews, subject 

matter expert reviews, industry product 

standards data, and product data created 

as a result of clinical studies or 

standardized test results. A minimum 

lifetime standard for DME may also help 

facilitate the HCPCS process. The 

current application form used to request 

new HCPCS codes for items includes 

the question regarding whether 

equipment is durable and, if so, 

instructs the applicant to provide an 

explanation of how the item can 

withstand repeated use. We have 

received requests from several entities 

including DME stakeholders for 

additional clarification regarding the 

durability standard for DME. Comments 

from some of these entities indicate that 

there is limited direction on what is 

required for an item to be considered 

‘‘durable’’ in the current regulation. 

Additional clarification of the term 

‘‘durable’’ would be helpful to industry 

stakeholders such as manufacturers in 

anticipating how their products would 

be treated under coding classification 

and benefit category determinations. 

C. Overview of the Provisions of the 

Proposed Durable Medical Equipment 

(DME) Regulation 

On July 8, 2011, we published in the 

Federal Register a proposed rule 

entitled, ‘‘Medicare Program; Changes to 

the End-Stage Renal Disease Prospective 

Payment System for CY 2012, End-Stage 

Renal Disease Quality Incentive 

Program for PY 2013 and PY 2014; 

Ambulance Fee Schedule; and Durable 

Medical Equipment’’ (76 FR 40498). In 

that rule, we proposed revising the 

definition of DME by adding a 3-year 

MLR that must be met by an item or 

device in order to be considered durable 

for the purpose of classifying the item 

under the Medicare benefit category for 

DME. 

D. Summary of the Proposed Provisions 

and Responses to Comments on the 

Definition of Durable Medical 

Equipment (DME) 3-Year Minimum 

Lifetime Requirement (MLR) 

We received approximately 35 

comments on our proposal. Interested 

parties that submitted comments 

included several medical device and 

equipment manufacturers, a healthcare 

provider, RESNA (Rehabilitation 

Assistive Technology Standards Board) 

and national organizations for HCPCS 

coding, disability, medical technology 

innovators and beneficiaries. In this 

final rule we provide a summary of each 

proposed provision, a summary of the 

public comments received, and our 

responses to them. 

We proposed making changes to the 

definition of DME at 42 CFR 414.202 in 

order to clarify the meaning of the term 

‘‘durable’’ in order to reflect our current 

interpretation of the statutory provisions 

discussed above consistent with the 

DME payment provisions. Specifically, 

we proposed establishing a 3-year MLR 

that equipment will be expected to meet 

in order to be considered DME. Based 

upon the statute and current 

regulations, equipment would not 

qualify as DME if it could not withstand 

repeated use. Although the capacity for 

reuse is in itself a fundamental 

characteristic of durability, it is not 

clear how many months or years an item 

must withstand repeated use in order to 

be considered durable. 

The Merriam Webster dictionary 

defines ‘‘durable’’ as the ability to exist 

for a long time without significant 

deterioration. The United States 

Department of Commerce uses a 

durability standard of 3 years for 

consumer durable goods for National 

Income and Accounts estimates.19

Furthermore, economics dictionaries,20

various encyclopedias,21 and economics 

textbooks 22 define durable goods as 

goods that are expected to last longer 

than 3 years. 

In addition, information gathered 

from various sources such as 

Rehabilitative Engineering and Assistive 

Technology Society of North America 

(RESNA),23 product catalogs, product 

warranty documents, and consumer 

product reviews indicate that 

conventional DME items such as 

wheelchairs, hospital beds, and 

ventilators specified in section 1861(n) 

of the Act typically have a useful life of 

3 or more years before they need to be 

replaced or need major repairs. 

Therefore, we proposed establishing a 3- 

year MLR for items to meet the 

durability criterion for DME. 

The 3-year MLR was proposed to 

increase the clarity of the current 

definition and give regulatory weight to 

a reasonable benchmark for a minimum 

period of durability or repeated use that 

an item would be expected to meet in 

order for the equipment to be 

considered DME. In addition, the rule 

was proposed to provide clear guidance 

to CMS and other stakeholders for 

making consistent informal benefit 

category determinations and national 

coverage determinations for DME. It was 

also proposed to assist manufacturers in 

designing and developing new medical 

equipment to have a better 

understanding of how long an item must 

be able to withstand repeated use in 

order to be considered DME for 

Medicare purposes. It is important to 

note that the 3-year MLR does not 

replace the RUL standard established by 

section 1834(a)(7)(C) of the Act for 

payment purposes. The RUL rules are 

used to determine how often payment 

can be made for replacement items and 

is not a MLR for DME. Although the 

proposed 3-year MLR is a requirement 

for determining whether an item will be 

considered durable, it is not an 

indication of the typical or average 

lifespan of DME, which in many cases 

may last for much longer than 3 years. 


emcdonald on DSK5VPTVN1PROD with RULES2
70288 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

24The NIPA Handbook (Concepts and Methods of 

the U.S National Income and Product Accounts, 

Chapter 5—Personal Care Expenditures,The 

handbook is available at http://www.bea.gov/

national/pdf/NIPAhandbookch5.pdf, U.S. 

Department of Labor/Bureau of Labor Statistics. 

http://www.bls.gov/ppi/ppiwholesale.htm, The 

McGraw Hill Dictionary of Modern Economics by 

Douglas Greenwald & Associates, Economics 

dictionary by Donald Moffat, Dictionary of Business 

and Economics by Christine Ammer and Dean 

Ammer, Encyclopedia of Business, Britannica 

Encyclopedia and Gale Encyclopedia, Lexicon of 

Economics by Kenyon A. Knopf, Fiscal Policy and 

Business Cycles by Alvin H. Hansen, Economics: 

Principles in Action by Steven M. Sheffrin, 

Durability of Output and Expected Stock Returns by 

Joao F. Gomes, Leonid Kogan, & Motohiro Yogo, 

Economics Fluctuations and Forecasting by Vincent 

Su, Macroeconomics by Roger A. Arnold, and 

National Income and Capital Formation by Simon 

Kuznet. 

1. Application of the 3-Year MLR to 

Items Currently Covered as DME and to 

Supplies and Accessories of Covered 

DME 

We proposed that the 3-year MLR be 

prospective only and not apply to 

equipment classified as DME before the 

proposed rule is implemented. Based on 

our experience with the program, we 

believe that most items that are 

currently classified as DME function for 

3 or more years. We also proposed not 

to apply the standard to supplies and 

accessories used with DME that are paid 

for under the DME benefit or blood 

glucose monitors and blood testing 

strips to allow for continued coverage of 

such items, supplies and accessories 

that are necessary for the effective use 

of DME. In the proposed rule we also 

solicited public comments on methods 

for determining when multi-component 

devices are durable. We requested 

comments only and did not propose any 

regulation changes regarding this issue. 

The comments received on this issue 

will be taken into consideration in 

determining whether changes on this 

issue should be proposed in future 

rulemaking. 

Comment: Several commenters 

acknowledged that it is necessary to 

establish a MLR for use in determining 

if medical equipment is durable for 

purposes of Medicare payment. 

Response: We agree and thank the 

commenters for their support and 

feedback that it is necessary to establish 

a MLR for use in determining if medical 

equipment is durable. 

Comment: Several commenters argued 

that the proposed rule is unnecessary 

and the current criteria for determining 

whether equipment is durable are clear, 

with one commenter stating that 

Medicare payment rules and 

manufacturer warranties already 

provide beneficiaries with appropriate 

protection. Two commenters suggested 

that CMS should publish a MLR for 

DME through subregulatory guidance. 

Response: We appreciate the 

comments; however, we believe there is 

a need to make changes to the definition 

of DME at 42 CFR 414.202 to clarify the 

meaning of the term ‘‘durable’’ to reflect 

our current interpretation of the statute, 

consistent with the DME payment rules 

previously discussed. Manufacturers of 

new technology medical devices have 

specifically asked how long an item 

must withstand repeated use in order to 

be considered durable equipment, and 

therefore our objective is to establish a 

clear expected MLR for equipment in 

order to facilitate consistent benefit 

category determinations. We also 

wanted to publish the 3-year MLR 

through rule making rather than 

providing this clarification through 

Manual provisions and program 

instructions to provide an opportunity 

for input given that the definition of 

DME is set forth in regulations. 

Comment: Several commenters stated 

that the proposed 3-year MLR was 

arbitrary and inappropriate. 

Response: We disagree. As discussed 

previously, the 3-year MLR for 

durability reflects the standard used by 

various Federal agencies to define 

durable consumer goods such as cars, 

refrigerators, air conditioning units, as 

well as hospital beds, walkers, crutches, 

scooters, wheelchairs, oxygen 

equipment, etc. Federal agencies such as 

the Department of Commerce and the 

Department of Labor have been applying 

this standard to durable goods including 

DME. Furthermore, the 3-year durability 

standard is widely supported in the 

industry. See for example, Simon 

Kuznet’s ‘‘National Income and Capital 

Formation’’ published by the National 

Bureau of Economic Research (1937), 

defining durable commodities as those 

whose period of utilization is more than 

3 years, and references in a wide variety 

of more recent literature, textbooks, 

dictionaries and encyclopedias, which 

specifically reference a 3-year period of 

time in defining or classifying items as 

durable.24 We see no reason why a 

different standard for durability should 

be used for the equipment covered as 

DME under the Medicare program. 

Therefore, we believe it is reasonable for 

the Department of Health and Human 

Services to apply this 3-year standard to 

DME. 

Additionally, in light of the statutory 

5-year RUL requirement and the DME 

payment rules, which support the fact 

that equipment paid for under the DME 

benefit is intended to be used over many 

years, we believe that it is reasonable to 

require that such equipment be 

functional or capable of withstanding 

repeated use for at least 3 years. As we 

discussed in our equipment 

replacement payment rule, we expect 

that equipment furnished by suppliers 

will function for a reasonable period of 

time. See 71 FR 65884, 65920 (Nov. 9, 

2006). We believe that a 3-year MLR 

would provide sufficient flexibility to 

cover new technology items that could 

be considered durable, but that may not 

last for 5 years before having to be 

replaced. As noted previously, the 

Congress, in drafting section 

4152(c)(2)(F) of the Omnibus Budget 

Reconciliation Act of 1990 (Pub. L. 101– 

508), selected 5 years as the default RUL 

for capped rental DME. The RUL was 

specified to be 5 years for each capped 

rental DME item unless prior experience 

in making payment for the item resulted 

in the establishment of an alternative 

RUL for the item. As part of the interim 

final rule (57 FR 57675) implementing 

this provision on December 7, 1992, we 

extended the RUL provision to other 

items of DME and specified that, in the 

absence of program instructions, the 

carrier may determine that the RUL of 

equipment is greater than, but not less 

than, 5 years. See 57 FR 57675, 57686 

(Dec. 7, 1992). Furthermore, such 

standards are consistent with the DME 

payment methodology, mandated by 

Section 4062(b) of the Omnibus Budget 

Reconciliation Act of 1987, Public Law 

100–203, and section 5101(b) of the 

Deficit Reduction Act of 2005, Public 

Law 109–171, which authorized the 

changes in the payment for oxygen 

equipment and mandated a cap on 

payments for all rented equipment other 

than a few frequently serviced items 

such as ventilators. The following are 

some examples of changes in payment 

rules that were made to avoid excessive 

payments for durable items needed and 

used by patients for extended periods of 

time lasting for several years. 

• The rental payments for 

inexpensive equipment such as canes 

and crutches that the beneficiary elects 

to rent rather than purchase is capped 

at the purchase fee for the equipment. 

• The payment for oxygen equipment 

is currently capped at 3 years and 

suppliers are mandated to continue 

furnishing the equipment after the cap 

for up to 2 additional years. 

• Title to other expensive equipment 

such as wheelchairs and hospital beds 

is transferred to the beneficiary after 13 

continuous rental payments. 

The 5-year RUL and payment rules 

apply to durable equipment that can be 

used for many years. See 71 FR at 

65920, (regarding the expectation that 

suppliers furnish a quality item that will 

last over a 5-year period). CMS 

continues to expect that in light of these 


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RUL provisions, equipment covered 

under the DME benefit should be 

capable of withstanding repeated use for 

a minimum time period. Consistent 

with these standards, we believe that a 

3-year durability threshold is 

reasonable, especially given our history 

with the program and the vast majority 

of categories of DME that already last for 

at least a 3-year period. 

Comment: One commenter suggested 

that CMS should refrain from adding a 

3-year MLR and instead define what is 

meant by repeated use. 

Response: We appreciate the 

comment; however, we believe it is 

necessary to establish a reasonable 

expectation regarding durability by 

adding a 3-year MLR to the definition of 

DME. Manufacturers of new technology 

medical devices have specifically asked 

how long an item must withstand 

repeated use in order to be considered 

durable equipment, and therefore we 

believe it is necessary to establish a 

clear expected MLR for equipment in 

order to assure payment for quality 

items of DME, and facilitate consistent 

benefit category and national coverage 

determinations. 

Comment: One commenter suggested 

establishing 6 months as the MLR for 

DME. 

Response: We appreciate the 

comment, however, as discussed earlier, 

3 years is a standard used by Federal 

agencies and the industry for classifying 

durable goods, which include 

equipment typically covered under the 

DME benefit. Therefore, we believe that 

adopting a standard of 3 years for 

purposes of the Medicare program 

would be reasonable and assure 

payment for equipment consistent with 

industry standards. Furthermore, as 

noted previously, in light of the 

statutory 5-year RUL requirement we do 

not believe it is reasonable to establish 

a 6-month standard. As discussed 

earlier, consistent with the statute, the 

payment rules support the fact that 

equipment included in the DME benefit 

is intended to be used over many years. 

For all the reasons stated above, we do 

not believe that a 6-month MLR for DME 

is a reasonable option. 

Comment: Several commenters added 

that using a universal 3-year MLR for all 

types of products is inflexible and 

nonfeasible. One commentator indicated 

that engineering a device for a 

guaranteed lifetime is virtually 

impossible. 

Response: We do not believe that 

establishing an expected 3-year MLR is 

inflexible and nonfeasible. As noted 

earlier, the regulations already provide 

a requirement for repeated use and a 5- 

year RUL standard. We proposed to 

establish an expected 3-year threshold 

standard consistent with these 

requirements and other Federal agencies 

and industry standards. In addition, 

while we understand that exact periods 

of longevity will vary, the purpose of 

the rule is to establish a MLR in order 

for the equipment to be considered 

durable for purposes of Medicare 

payment determinations. The 3-year 

MLR is intended to be a minimum 

threshold that equipment will be 

expected to meet in order to be 

considered durable under Medicare 

regulations We expect that equipment 

furnished under the benefit will be 

quality items that will function 

consistent with industry standards for a 

3 year threshold period. 

Furthermore, a vast majority of the 

categories of DME last for 3 years or 

longer. Therefore, consistent with these 

RUL and payment provisions, we 

believe that a 3-year MLR would 

continue to provide the flexibility to 

cover new technology items. 

We also appreciate the comment that 

engineering a device for a guaranteed 

lifetime is virtually impossible; 

however, given the industry standards, 

we expect that equipment should 

function for a minimum threshold 

period of time. Based on our experience 

in making benefit category 

determinations and analyzing the types 

of equipment that are covered under the 

DME benefit over the years; we believe 

that the 3-year MLR is a reasonable 

threshold standard for the types of 

equipment paid for under the DME 

benefit. Therefore, we believe that for 

purposes of Medicare payment, it is 

reasonable to establish a threshold of 3 

years which is consistent with other 

Federal agencies and industry 

standards. 

Comment: Two commenters suggested 

that the MLR should be based upon a 

specific code set, natural therapeutic 

requirements, and normal length of 

needs and medical necessity as dictated 

by the prescriber, rather than a 

universally applied standard. 

Response: We thank the commenters 

for their input that the MLR should be 

based upon a specific code set, natural 

therapeutic requirements, and normal 

length of needs and medical necessity as 

dictated by the prescriber, rather than a 

universally applied standard. However, 

we have established a standard 

applicable to the Medicare benefit that 

is designed to be consistent with criteria 

established in the statute and payment 

provisions. We have interpreted the 

benefit consistent with the standards in 

the statute, Medicare payment 

regulations, industry standards, and 

Federal agency standards. Furthermore, 

based on our experience in making 

benefit category determinations and 

analyzing the types of equipment that 

are covered under the DME benefit over 

the years, the majority of the categories 

of DME items already last for 3 years or 

longer. As noted earlier, we already 

expect items will function consistent 

with the 5-year RUL and DME payment 

rules. For all the reasons discussed, we 

believe that it is appropriate to apply 

the 3-year MLR as a threshold for 

defining durability for equipment under 

the program. 

Comment: One commenter 

recommended that CMS create a 

rebuttable presumption that a DME item 

should last for 3 years but provide that 

a manufacturer can rebut that 

presumption with convincing evidence 

that the 3-year MLR should not be 

applied automatically in a particular 

instance. 

Response: We disagree with the 

commenter’s recommendation for 

creating a rebuttable presumption that a 

DME item should last for 3 years. As 

stated earlier, manufacturers of new 

technology medical devices have 

specifically asked how long an item 

must withstand repeated use in order to 

be considered durable equipment, and 

therefore our objective is to establish an 

expected MLR for equipment in order to 

assure payment for quality items and 

facilitate consistent benefit category and 

national coverage determinations. The 

issue of linking durability to the lifetime 

of equipment and where to draw the 

line has come to our attention in light 

of the recent technology and 

engineering in the field of medical 

devices and equipment. We are 

establishing a MLR for DME to clarify 

our expectation regarding durability. An 

option to rebut the 3-year MLR in some 

instances would undermine this 

objective. 

Comment: Several commenters 

recommended that CMS collaborate 

with industry stakeholders to develop 

additional requirements related to 

determining durability of items. 

Response: We appreciate the 

comment. The current processes 

including Benefit Category 

Determination (BCD), National Coverage 

Determination (NCD), Local Coverage 

Determinations (LCD), and Healthcare 

Common Procedure Coding System 

(HCPCS) include meetings with 

manufacturers in addition to the public 

where we seek input from the 

stakeholders. We will continue to 

receive input from stakeholders 

consistent with the BCD and NCD 

process when determining whether an 

item is durable. See 68 FR 55634, 

(September 26, 2003); and http://www.


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cms.gov/DeterminationProcess/

Downloads/FR09262003.pdf. 

See also, information on the HCPCS 

Level II coding process at: http://www.

cms.gov/MedHCPCSGenInfo/

Downloads/2013_HCPCS_Application.

pdf. http://www.cms.gov/

MedHCPCSGenInfo/08_

HCPCSPublicMeetings.asp#TopOfPage. 

Comment: Several commenters stated 

that the rule would create burdensome 

testing requirements to verify the 3-year 

MLR for a device. One commenter 

stated that testing standards cannot 

validate the lifetime of a device and it 

is unclear how a manufacturer would 

prove an item meets the 3-year MLR. 

One commenter noted that added 

testing for durability will increase the 

cost for manufacturers in addition to 

designing new 3-year versions of DME 

products that currently function for a 

shorter period of time. 

Response: We did not intend to create 

burdensome testing requirements. As 

noted previously, our objective is to 

establish a reasonable minimum lifetime 

standard for DME for purposes of 

Medicare payment, consistent with 

other Federal agencies and industry 

practice. As stated in the proposed 

regulation, in cases where it is not clear 

that the equipment can function for the 

specified minimum period of time, we 

will review information and evidence 

consistent with the current benefit 

category determination process to 

determine the expected life of the 

equipment. As discussed previously, the 

benefit category determination process 

typically involves reviewing 

information from various sources 

including but not limited to information 

related to Food and Drug 

Administration (FDA) pre-market 

clearance, product manuals, operating 

guides, warranty documents, and 

standardized test results. The NCD 

process is available at http:// 

www.cms.gov/DeterminationProcess/

Downloads/FR09262003.pdf. See also, 

68 FR 55638 (September 23, 2003). 

Additionally, we routinely collect 

information regarding durability of new 

products as part of the HCPCS editorial 

process in order to identify categories of 

new DME subject to the procedures 

established in accordance with the 

mandate of section 531(b) of the 

Medicare, Medicaid and SCHIP Benefit 

Improvement and Protection Act of 

2000 (BIPA 2000), Public Law 106–554. 

Based on our experience with the 

program, this information has been 

readily available from the manufacturers 

of these items and other entities 

submitting requests for changes to the 

HCPCS. Information on the HCPCS 

Level II coding process is available at: 

http://www.cms.gov/Med

HCPCSGenInfo/Downloads/2013_

HCPCS_Application.pdf and http:// 

www.cms.gov/MedHCPCSGenInfo/08_

HCPCSPublicMeetings.asp#TopOfPage. 

Furthermore, the 3-year MLR will be 

prospective and will not be applied on 

a retroactive basis; it will be used for 

making benefit category decisions for 

new items. As noted previously, we 

believe that a vast majority of the 

categories of DME already last for at 

least 3 years, consistent with the RUL 

and payment provisions. The 3-year 

MLR is designed to be a minimum 

threshold for determining if an item is 

considered durable and we expect that 

new DME products in general will 

continue to meet or exceed this MLR. 

For reasons discussed above, we have 

no reason to believe that the 3-year MLR 

will increase the cost for manufacturers. 

Comment: One commenter supported 

the grandfathering provision. 

Response: We thank the commenter 

for the input and support. 

Comment: Several commenters voiced 

concerns that the new requirement will 

stifle innovation and prevent the entry 

of new devices in the market. Several 

commenters stated that the 

grandfathering provision would create 

disparities among manufacturers and be 

disadvantageous to new product 

manufacturers and advantageous to 

existing DME product manufacturers. 

Some commenters stated that applying 

the rule prospectively and not applying 

the rule to items currently classified as 

DME makes the rule unclear and 

nontransparent. 

Response: We did not intend to create 

disparities. As noted in the proposed 

regulation and a response to an earlier 

comment, we are making changes to the 

definition of DME to reflect our current 

interpretation of the statute consistent 

with the RUL and general DME payment 

provisions. The 3-year MLR is designed 

to be applied on a prospective basis and 

would represent a minimum threshold 

for determinations regarding equipment 

durability. As noted earlier, in light of 

the statutory 5-year RUL requirement 

and DME payment rules which support 

the fact that DME items should be able 

to withstand repeated use for many 

years; we believe that it is reasonable to 

require that equipment be capable of 

withstanding repeated use consistent 

with the industry 3 year standard. We 

believe that a 3-year MLR would 

provide the flexibility to cover new 

technology items that can be considered 

durable, but may not last for 5 years 

before having to be replaced. 

We also believe that the 3-year MLR 

is reasonable given the general payment 

and RUL requirements. As discussed 

previously, the 5-year RUL is well 

established since 1992 and we have not 

found that the RUL standard has stifled 

innovation or prevented entry of new 

devices in the market. Therefore, in 

light of these provisions, we believe that 

3 years is a reasonable threshold 

consistent with Medicare payment 

rules, industry standards and Federal 

agency standards. However, while we 

expect that equipment will meet our 3 

year standard, we will continue to 

monitor the issue and undertake 

additional rulemaking if necessary. 

Comment: One commenter requested 

clarification on the applicability and 

scope of the rule. Some commenters 

requested clarification on how the MLR 

would be applied to new generations of 

products that are currently classified as 

DME or how the standard would apply 

to an existing DME item that is modified 

in the future to improve functionality. 

One commenter recommended that the 

new rule not apply if an existing DME 

item is just upgraded. Some commenters 

questioned if the rule would be 

applicable to only products that apply 

for a new HCPCS code. Some 

commenters questioned if the new rule 

would apply to items that are billed 

using existing HCPCS codes or any item 

that fits into an existing product 

category or existing HCPCS codes and 

how miscellaneous codes would be 

handled. 

Response: We will apply the revised 

definition for DME on a prospective 

basis. That is, we will not redetermine 

for payment as DME any product that is 

currently paid under the DME benefit. 

The revised definition would only apply 

to new products. To the extent that a 

modified product is not a new product 

(including an item that has been 

upgraded), the 3-year MLR will not be 

applicable. We will consider issuing 

additional guidance to provide further 

clarification if necessary. 

Comment: One commenter questioned 

how CMS would validate that a device 

lasts fewer than 3 years. One commenter 

requested clarification on whether the 

MLR would be calculated from the date 

the manufacturer sells the item to the 

provider or date first provided to the 

patient. 

Response: We are not proposing a 

new process and as noted previously, 

we will continue to follow the current 

benefit category determination process 

to determine whether a product meets 

the standards for DME set forth in the 

rule. As noted earlier, the expected life 

of an item will be estimated based upon 

information gathered from various 

sources consistent with the current 

benefit category determination process 


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and will be calculated based upon use, 

not when it is sold to a supplier. 

Comment: One commenter voiced 

concern that there would be no process 

for appealing decisions that items are 

not durable. 

Response: A manufacturer or supplier 

can request a reconsideration of an 

informal BCD determination or a 

reconsideration of a formal NCD 

consistent with the statute. See (68FR 

55638, September 26, 2003) available at: 

http://www.cms.gov/ 

DeterminationProcess/Downloads/ 

FR09262003.pdf. 

Comment: One commenter stated that 

the current testing standards for certain 

types of equipment that are currently 

classified as DME require a much 

shorter lifespan than 3 years. 

Response: We appreciate the 

comment; however, as stated 

previously, the 3-year MLR would not 

apply to any items currently classified 

as DME. In addition, the 3-year MLR 

would not apply to blood testing strips, 

accessories and supplies used with DME 

that are necessary for the effective use 

of the DME item. For example: A blood 

glucose monitor and lancets used to 

obtain blood samples for use in a blood 

glucose monitor are covered under the 

DME benefit. The blood glucose monitor 

is covered as DME and the lancets are 

covered as supplies necessary for the 

effective use of the DME item. 

After reviewing all the comments, we 

are finalizing the regulation to revise the 

definition of durable medical equipment 

at § 414.202 by adding a 3-year MLR 

that must be met by an item or device 

in order to be considered durable for the 

purpose of classifying the item under 

the Medicare benefit category for DME. 

This will be effective with respect to 

items classified as DME after January 1, 

2012. 

2. Application of the 3-Year MLR to 

Multi-Component Devices 

In some cases, a device may be a 

system consisting of durable and nondurable components that together serve 

a medical purpose. Currently, a multicomponent device consisting of durable 

and non-durable components is 

considered non-durable if the 

component that performs the medically 

necessary function of the device is nondurable, even if other components that 

are part of the device are durable. 

Therefore, if the proposed regulation to 

establish a minimum 3-year MLR for 

DME is applied to these devices, the 

component(s) of a multi-component 

device that performs the medically 

necessary function of the device would 

need to meet the 3-year MLR. Although, 

we did not propose to change our policy 

with regard to these types of systems at 

this point, we solicited public 

comments on this topic. Specifically, we 

solicited public comments on various 

ways we might consider applying the 3- 

year MLR to multi-component devices 

consisting of both durable and nondurable components. Various options 

might include the following: 

1. Apply the 3-year MLR to the 

component(s) that performs the entire 

medically necessary function of the 

device. 

2. Apply the 3-year MLR to the 

component(s) that performs a vital part 

of the medically necessary function of 

the device. 

3. Consider a device/system to be 

durable only if the cost of the durable 

component(s) over a period of time (for 

example, 5 years) makes up greater than 

50 percent of the overall cost of the 

device/system over the same period. 

In the proposed rule we solicited 

public comments on the application of 

various options to multi-component 

devices to determine whether the device 

is durable. We received approximately 

20 comments pertaining to the topic of 

applying the 3-year MLR to multicomponent devices consisting of both 

durable and non-durable components. 

One commenter disagreed with option 

one because this option requires that the 

whole device meet the MLR as many 

devices will not be able to function 

without even minor elements, such as 

accessories and supplies. This 

commenter noted that for the option 

two, it is not clear what is meant by 

‘‘performs a vital part of the medically 

necessary function.’’ This commenter 

further stated that for option three it is 

unclear what is meant by ‘‘cost.’’ The 

commenter noted that option 3 could be 

considered if the Medicare 

reimbursement rate for the durable and 

non-durable components is used as the 

‘‘cost’’ for calculating the ratio of the 

cost for durable and non-durable 

components. One commenter supported 

the 3-year MLR and endorsed option 2 

which applies the 3-year MLR to the 

component(s) that performs a vital part 

of the medically necessary function for 

multi-component devices. 

Several commenters endorsed the 

coverage of a specific multi-component 

device for Medicare beneficiaries. One 

commenter stated that medical 

equipment comprised of durable and 

non-durable components should be 

considered durable if any one 

component of the equipment is able to 

meet the MLR as determined in the 

HCPCS application process and CMS 

should evaluate the medically necessary 

function performed by the device in its 

totality rather than basing durability on 

the component that performs the 

medically necessary function of the 

device. 

We requested comments only and did 

not propose any regulation changes. 

Therefore, the comments received will 

be taken into consideration for future 

proposed rulemaking. 

V. Interim Final Rule Regarding the 

Competitive Acquisition Program for 

Certain Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) 

A. Background 

1. Legislative and Regulatory History of 

the DMEPOS Competitive Bidding 

Program 

Section 1847 of the Act, as amended 

by section 302(b)(1) of the Medicare 

Prescription Drug, Improvement, and 

Modernization Act of 2003 (MMA)(Pub. 

L. 108–173), requires the Secretary to 

establish and implement a Medicare 

DMEPOS Competitive Acquisition 

Program (‘‘competitive bidding 

program’’ or ‘‘program’’). Under the 

competitive bidding program, Medicare 

sets payment amounts for selected 

DMEPOS items and services furnished 

to beneficiaries in competitive bidding 

areas (CBAs) based on bids submitted by 

qualified suppliers and accepted by 

Medicare. For competitively bid items, 

the payment amounts, referred to as 

‘‘single payment amounts’’, replace the 

fee schedule payment methodology set 

forth in section 1834 of the Social 

Security Act (the Act) and 42 CFR part 

414, Subpart D of our regulations. 

The competitive bidding program 

guarantees savings to both the Medicare 

program and beneficiaries under the 

program. The program also includes 

provisions to ensure beneficiary access 

to quality DMEPOS items and services. 

Section 1847 of the Act limits 

participation in the program to 

suppliers who have met applicable 

quality and financial standards and 

requires the Secretary to maintain 

beneficiary access to multiple suppliers. 

On May 1, 2006, we issued a 

proposed rule (72 FR 25654) in the 

Federal Register that would implement 

the competitive bidding program for 

certain DMEPOS items and services and 

solicited public comment on our 

proposals. On April 10, 2007, we issued 

a final rule (72 FR 17992) in the Federal 

Register addressing the comments on 

the proposed rule and establishing the 

regulatory framework for the Medicare 

DMEPOS competitive bidding program 

in accordance with section 1847 of the 

Act. 

Consistent with the requirements of 

section 1847 of the Act and the 


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competitive bidding regulations, we 

began implementing the program by 

conducting the first Round of 

competition in 2007 in 10 of the largest 

metropolitan statistical areas (MSAs) for 

10 product categories and implemented 

the competitive bidding program on July 

1, 2008. 

2. The MIPPA and the Medicare 

DMEPOS Competitive Bidding Program 

On July 15, 2008, section 154 of the 

Medicare Improvements for Patients and 

Providers Act (MIPPA) amended section 

1847 of the Act to make certain limited 

changes to the Medicare DMEPOS 

competitive bidding program. Section 

154(a) of the MIPPA delayed 

competition under the program and 

terminated the competitive bidding 

contracts effective June 30, 2008. 

The MIPPA required the Secretary to 

conduct a second competition for 

Round 1 in 2009 (‘‘Round 1 rebid’’) that 

included the ‘‘same items and services’’ 

in the ‘‘same areas’’ as the 2007 Round 

1 competition, with certain limited 

exceptions. Specifically, the Round 1 

rebid excluded negative pressure wound 

therapy (NPWT) items and services and 

excluded Puerto Rico. In addition, 

section 154(a) of the MIPPA 

permanently excluded group 3 complex 

rehabilitative wheelchairs from the 

competitive bidding program by 

amending the definition of ‘‘items and 

services’’ in section 1847(a)(2) of the 

Act. Suppliers, including suppliers that 

previously were awarded a competitive 

bidding contract, had to resubmit bids 

to be considered for a contract under the 

Round 1 rebid. 

Section 154(a) of the MIPPA also 

delayed competition for Round 2 of the 

competitive bidding program from 2009 

to 2011 and subsequent competition 

under the program from 2009 until after 

2011. A competition for a national mail 

order competitive bidding program may 

occur after 2010 as a result of the 

MIPPA. 

The MIPPA mandated certain changes 

to the bidding process, starting with the 

Round 1 rebid. Section 154(a) of the 

MIPPA added a new paragraph (F) to 

section 1847(a)(1) of the Act, which sets 

forth a process for supplier feedback on 

missing financial documents. Pursuant 

to this requirement, we notify suppliers 

that submit their bids within a specific 

time period if their bid submission is 

missing any of the required financial 

documents. We allow suppliers to 

submit missing financial documents 

within 10 business days after this 

notice. 

Section 154(b) of the MIPPA amended 

section 1847(b)(3) of the Act to require 

contract suppliers to notify us of 

subcontracting relationships they have 

entered into for the purpose of 

furnishing items and services under the 

competitive bidding program. Contract 

suppliers must also inform CMS 

whether each subcontractor meets the 

accreditation requirement set forth in 

section 1834(a)(20)(F)(i) of the Act, if 

applicable to the subcontractor. 

Section 154(d) of the MIPPA excludes 

from the competitive bidding program 

certain DME furnished by a hospital to 

the hospital’s patients during an 

admission or on the date of discharge. 

On January 16, 2009, we published in 

the Federal Register (74 FR 2873) an 

interim final rule with comment period 

to incorporate into regulations at 42 CFR 

414 Subpart F the MIPPA provisions 

discussed above. 

In addition to the changes 

implemented through the interim final 

rule, section 154 of the MIPPA made 

other changes to the competitive 

bidding program which included: 

• Exclusions of certain areas in 

subsequent rounds that are not already 

selected under Rounds 1 and 2; 

• Extension of the Program Advisory 

and Oversight Committee; 

• Exemption for Off-the-Shelf 

Orthotics from Competitive Bidding 

when provided by Certain Providers; 

and 

• Evaluation of certain Healthcare 

Common Procedure Coding System 

(HCPCS) codes. 

These provisions have been addressed 

through subsequent rulemaking or 

subregulatory guidance, as appropriate. 

For additional information about 

exclusions of certain areas in 

subsequent rounds that are not already 

selected under Rounds 1 and 2 and the 

exemption for off-the-shelf orthotics 

from competitive bidding when 

provided by certain providers, please 

refer to the November 29, 2010, Federal 

Register (75 FR 73574). 

The following administrative 

requirements were also not addressed in 

the interim final rule: 

• A post-award audit by the Office of 

Inspector General; 

• Establishment of a Competitive 

Acquisition Ombudsman; and 

• A Government Accountability 

Office report on the results of the 

competitive bidding program. 

The MIPPA mandated a nationwide 

9.5 percent reduction in the fee 

schedule payment amounts for all items 

and services that were competitively bid 

during the prior round of competition 

regardless of any exclusion such as 

group 3 complex rehabilitative 

wheelchairs. This provision was not 

addressed in the interim final rule 

because it was administered through the 

standard process for updating fee 

schedule amounts. 

On February 10, 2009, we published 

a notice (74 FR 6557) in the Federal 

Register proposing to delay the effective 

date of the interim final rule by 60 days 

to allow Department officials the 

opportunity for further review of the 

issues of law and policy raised by the 

interim final rule. On February 19, 2009, 

we published another notice (74 FR 

7653) in the Federal Register that 

implemented the temporary delay 

proposed on February 10, 2009. As 

specified by the February 19, 2009 

notice, the interim final rule became 

effective on April 18, 2009. 

B. Overview of the Interim Final Rule 

On January 16, 2009, we published in 

the Federal Register an interim final 

rule (74 FR 2873 through 2881) entitled 

‘‘Changes to the Competitive 

Acquisition of Certain Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies (DMEPOS) by Certain 

Provisions of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA)’’. In the 

interim final rule, we revised current 

provisions at 42 CFR part 414, Subpart 

F, to incorporate certain selfimplementing MIPPA provisions. The 

interim final rule addressed the 

following changes made by the MIPPA: 

General Changes to the DMEPOS 

Competitive Bidding Program: 

• Temporary Delay of the Medicare 

DMEPOS Competitive Bidding Program. 

• Supplier Feedback on Missing 

Covered Documents. 

• Disclosure of Subcontractors and 

their Accreditation Status under the 

Competitive Bidding Program. 

• Exemption from Competitive 

Bidding for Certain DMEPOS. 

• Exclusion of Group 3 Complex 

Rehabilitative Wheelchairs. 

Round 1 Changes of the Competitive 

Bidding Program: 

• Rebidding of the ‘‘same areas’’ as 

the previous Round 1, unless otherwise 

specified. 

• Rebidding of the ‘‘same items and 

services’’ as the previous Round 1, 

unless otherwise specified. 

C. Summary of the Interim Final Rule 

Provisions and Response to Comments 

on Changes to the Competitive 

Acquisition of Certain Durable Medical 

Equipment, Prosthetics, Orthotics and 

Supplies (DMEPOS) by Certain 

Provisions of the Medicare 

Improvements for Patients and 

Providers Act of 2008 (MIPPA) 

The interim final rule was published 

in the Federal Register on January 16, 

2009 with a comment period that ended 


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on March 17, 2009. We received 

approximately 793 timely pieces of 

comments from the interim final rule. 

Various parties submitted comments 

including DMEPOS manufacturers, 

suppliers, national associations 

representing the supplier community, 

and pharmacies. 

We note that we received many 

comments on a wide range of issues that 

were not addressed in the interim final 

rule. We thank commenters for sharing 

their views on these issues; however, 

because these comments were outside 

the scope of the interim final rule, we 

do not address those comments in this 

final rule. In this final rule we provide 

a summary of each proposed provision, 

a summary of the public comments 

received, our responses to them, and 

any changes to the interim final rule we 

are implementing in this final rule as a 

result of comments received. 

1. General Changes to the DMEPOS 

Competitive Bidding Program 

a. Temporary Delay of the Medicare 

DMEPOS Competitive Bidding Program 

Section 154(a) of the MIPPA amended 

section 1847(a)(1) of the Act to delay 

competition under Rounds 1 and 2 of 

the Competitive Bidding Program from 

2007 and 2009 to 2009 and 2011, 

respectively. It also delayed competition 

for a national mail order program until 

after 2010 and competition in additional 

areas, other than mail order, until after 

2011. 

We revised § 414.410(a)(1) and (2) to 

indicate that competition under Round 

1 of the competitive bidding program 

occurred in 2009 and competition under 

Round 2 of the program would occur in 

2011. In addition, we have revised 

§ 414.410(a)(3) to indicate that 

competition in additional MSAs will 

occur after 2011 (or, in the case of 

national mail order for items and 

services, after 2010). 

The comments we received on 

Temporary Delay of the Medicare 

DMEPOS Competitive Bidding Program 

and our responses are set forth below. 

Comment: Several commenters 

disagreed with starting competition for 

the Round 1 rebid in 2009 and wanted 

CMS to delay the program further. Some 

commenters suggested that CMS spend 

more time determining the impact and 

improving the quality of the DMEPOS 

Competitive Bidding Program for 

suppliers and beneficiaries by 

considering comments received on the 

interim final rule and evaluating the 

effects from Round 1 of the competitive 

bidding program before starting the 

Round 1 rebid. 

Response: Section 154(a) of the 

MIPPA 2009 required the supplier 

competition for the Round 1 rebid to 

occur in 2009; therefore, we could not 

delay the program further. We note that 

we made numerous process 

improvements to the competitive 

bidding program for the Round 1 rebid. 

For example, we implemented an 

upgraded on-line bid submission 

system, early bidder education, and 

increased oversight of bidders that are 

new to product categories or 

competitive bidding areas to ensure they 

meet our requirements. These 

improvements, combined with the 

MIPPA reforms discussed in this final 

rule, resulted in a smoother experience 

for bidders and contributed to the 

successful implementation of the Round 

1 rebid contracts and prices on January 

1, 2011. 

Consistent with our expectations, the 

Round 1 rebid results so far have been 

very positive. The program is fulfilling 

its promise as an effective tool to help 

Medicare set appropriate payment rates 

for DMEPOS items and services: 

payment amounts from the supplier 

competition for the Round 1 rebid of the 

program resulted in average savings of 

35 percent as compared to the current 

fee schedule prices. The program is 

expected to save more than $17 billion 

in Medicare expenditures over 10 years. 

In addition to this positive impact on 

the Medicare Part B trust fund balance, 

the program is expected to save 

beneficiaries more than $11 billion over 

the next ten years as a result of lower 

coinsurance payments and the 

downward effect on monthly premium 

payments. The overall combined 

savings to Medicare and beneficiaries is 

therefore expected to total more than 

$28 billion over the first ten years of the 

program. 

As anticipated, beneficiaries are 

receiving quality products from contract 

suppliers in their CBAs. 76 percent of 

contracts were awarded to suppliers 

already furnishing contract items in the 

local area. Additional contract suppliers 

have furnished other items in the local 

area or furnished contract items in other 

areas: fully 97 percent of contracts were 

awarded to suppliers already 

established in the competitive bidding 

area, the product category, or both. Also, 

CMS exceeded the the 30 percent small 

supplier target. For the Round 1 rebid, 

small suppliers, those with gross 

revenues of $3.5 million or less as 

defined for the program, make up about 

51 percent of the contract suppliers. As 

discussed later in this preamble, our 

comprehensive monitoring program has 

shown a very smooth effective 

implementation with few inquiries and 

complaints and no changes in 

beneficiary health status outcomes. 

After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

b. Supplier Feedback on Missing 

Covered Documents 

Section 1847(b)(2)(A) of the Act 

prohibits the Secretary from awarding a 

contract under the program to a supplier 

unless the supplier meets applicable 

financial standards specified by the 

Secretary, taking into account the needs 

of small providers. We have 

implemented this requirement at 

§ 414.414(d) of the competitive bidding 

regulations, which requires suppliers to 

submit, as part of their bids, financial 

documents specified in the request for 

bids (RFB). 

The RFB issued for the Round 1 rebid 

required suppliers to submit the same 

categories of financial documents as we 

requested for the previous Round 1 

competition. In the previous round of 

competition, we required suppliers to 

submit financial documents from the 

most recent 3 years. As stated in 42 CFR 

414.414(d), the required financial 

documents have been specified in the 

RFB. Based on experience from the 

previous round of competition, we 

modified the required financial 

documents to lessen the burden on 

suppliers; instead of 3 years of 

documentation, we required only 1 year. 

We believe that we can determine 

whether a supplier demonstrates 

financial soundness by reviewing one 

year of documentation. 

Section 154(a) of the MIPPA added a 

new paragraph (F) to section 1847(a)(1) 

of the Act, which established a detailed 

process by which we must notify 

suppliers of missing ‘‘covered 

documents’’—defined by MIPPA as 

financial, tax or other documents 

required to be submitted by a bidder as 

part of an original bid submission in 

order to meet required financial 

standards—if such documents are 

submitted within a specified time 

period. The MIPPA details the specific 

steps of this process and provides a 

timeline for each stage of this covered 

document submission review. We have 

implemented this provision of the 

MIPPA consistent with its detailed 

requirements. 

Consistent with section 1847(a)(1)(F) 

of the Act, in the case of a bid in which 

one or more covered documents in 

connection with such a bid has been 

submitted not later than the covered 

document review date, we would notify 

suppliers of each covered document that 

is missing from the bidder’s submission 

as of the covered document review date. 

As set out in the Act the ‘‘covered 

document review date’’ is the later of— 


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(1) The date that is 30 days before the 

final date specified by the Secretary for 

submission of bids; or (2) the date that 

is 30 days after the first date specified 

by the Secretary for submission of bids. 

For example, if a bid window opens on 

January 1st and closes on April 30th, the 

‘‘covered document review date’’ would 

be the later of: (1) March 31st (30 days 

before the final date specified by the 

Secretary); or (2) January 31st (30 days 

after the first date specified by the 

Secretary). Therefore, in this case, the 

‘‘covered document review date’’ would 

be March 31st. Suppliers that submit 

their financial documents after the 

covered document review date would 

not receive notice of any missing 

financial documents. 

Section 1847(a)(1)(F)(i) of the Act 

requires that we notify bidders of any 

missing covered documents within 45 

days after the covered document review 

date for the Round 1 rebid. In 

subsequent rounds of competition, we 

have 90 days after the covered 

document review date to provide such 

notice. For all rounds of competition, 

bidders that are notified of the missing 

covered document(s) have 10 business 

days after the date of notice to submit 

the missing covered document(s). If a 

supplier submits the missing covered 

document(s) within this time period, we 

may not reject the supplier’s bid on the 

basis that any covered document is 

missing or has not been submitted on a 

timely basis. 

Section 1847(a)(1)(F)(iii) of the Act 

places certain limitations on the covered 

document review process. First, the 

covered document review process 

applies only to the timely submission 

(prior to the covered document review 

date) of covered documents. Second, the 

process does not apply to any 

determination as to the accuracy or 

completeness of the covered documents 

submitted or whether such documents 

meet applicable financial requirements. 

Third, the process does not prevent us 

from rejecting a bid for reasons other 

than those not described in section 

1847(a)(1)(F)(i)(II) of the Act. Fourth, the 

covered document review process shall 

not be construed as permitting a bidder 

to change bidding amounts or to make 

other changes in a bid submission. 

We have amended § 414.414 by 

adding paragraphs (d)(2)(i) through (iii) 

to set forth the required covered 

document review process. These 

paragraphs identify the timeframes 

established by the MIPPA for— 

• Suppliers to submit covered 

documents in order to be eligible to 

receive notice of any missing covered 

documents; 

• CMS to review the submitted 

covered documents and notify bidders 

of any missing covered documents; and 

• Suppliers to submit the missing 

covered documents. 

We also added a definition for 

‘‘covered document’’ and ‘‘covered 

document review date’’ to § 414.402. 

Comment: Several commenters 

suggested that the decision to change 

financial document requirements from 3 

years to 1 year should have been 

subjected to notice and comment 

rulemaking. Commenters believed that 

this would ensure that quality suppliers 

are selected as contract suppliers, taking 

into consideration historical 

demonstrated financial stability. Some 

commenters also believed that it would 

be easier to falsify 1 year worth of 

financial documents as opposed to 3 

years. 

Response: As noted in the interim 

final rule, regulations at 42 CFR 

414.414(d) state that required financial 

documents will be specified in the RFB. 

Based on our experience from the initial 

Round 1 competition, we determined 

that one year of financial documents 

provides sufficient information for 

determining whether suppliers meet the 

required financial standards. In the 

interest of lessoning the burden on 

suppliers and ensuring compliance with 

program requirements, we therefore 

decided to revise the financial 

documentation requirements from three 

years to one year. We also sought public 

comment on the RFB for the Round 1 

rebid through the Paperwork Reduction 

Act (PRA) process, and the Office of 

Management and Budget (OMB) 

approved the RFB (OMB Control 

Number 0938–1016). 

Comment: One commenter reflected 

that, in Round 1 of the competitive 

bidding program, many bidders lost 

because they did not have the required 

documents and CMS did not allow 

suppliers to resend the documents after 

the close of the bid window. 

Response: The MIPPA-mandated 

covered document review process was 

incorporated into our regulations 

through the interim final rule addressed 

this issue. Many Round 1 rebid bidders 

took advantage of this process, and we 

believe it greatly helped these bidders 

ensure that they submitted all required 

financial documents. 

Comment: One commenter suggested 

that the rule needs to address not only 

missing documents but missing and 

incorrect contents in documents. 

Response: We appreciate this 

comment; however, the statute 

specifically indicates that the covered 

document review process does not 

apply to the accuracy or completeness 

of individual documents. 

After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

c. Disclosure of Subcontractors and 

Their Accreditation Status Under the 

Competitive Bidding Program 

Section 154(b)(2) of the MIPPA added 

a new paragraph (C) to section 1847 

(b)(3) of the Act. This new paragraph 

requires contract suppliers to disclose 

information on: (1) Each subcontracting 

arrangement the supplier has in 

furnishing items and services under the 

contract; and (2) whether each such 

subcontractor meets the accreditation 

requirement of section 1834(a)(20)(F)(i) 

of the Act, if applicable to such 

subcontractor. The contract supplier 

must make this disclosure not later than 

10 days after the date a supplier enters 

into a contract with CMS. If the contract 

supplier subsequently enters into a 

subcontracting relationship, the 

supplier must disclose this information 

to CMS no later than 10 days after 

entering into the subcontracting 

relationship. 

Section 154(b) of the MIPPA added 

section 1834(a)(20)(F)(i) to the Act, 

which mandates that the Secretary 

require suppliers furnishing items and 

services under a competitive bidding 

program on or after October 1, 2009, 

directly or as a subcontractor for another 

entity, to submit evidence of 

accreditation by a CMS-designated 

accreditation organization. Both 

contract suppliers and their 

subcontractors that furnish items and 

services under the competitive bidding 

program must do so in accordance with 

the applicable supplier standards found 

in Part 424, subpart D and other Federal 

regulations. 

We have amended § 414.422, by 

revising paragraph (f) to set forth these 

requirements for disclosing 

subcontracting arrangements. We have 

also addressed subcontracting 

relationships and the method for 

disclosure of the subcontracting 

relationships in subregulatory guidance. 

Comment: Some commenters stated 

that subcontracting relationships should 

not be allowed after contract suppliers 

have been selected. Commenters 

believed that companies that did not 

win a contract would contact the 

contract supplier and form an 

arrangement in which the contract 

supplier would bill for an item 

furnished by a non-contract supplier. 

Several commenters also mentioned that 

adding subcontractors after contract 

suppliers have been selected could 

mean that the contract suppliers are not 


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able to furnish items to beneficiaries in 

the CBA and that they need 

subcontractors to provide items for the 

contract supplier. 

Response: The MIPPA specifically 

indicates that contract suppliers must 

disclose subcontracting relationships 

they establish after contract award; 

therefore, we do not have discretion to 

prohibit subcontracting after contract 

suppliers have been selected. Under the 

competitive bidding program, contract 

suppliers are permitted to subcontract 

under the same rules that apply to all 

DMEPOS suppliers. Thus, the extent to 

which contract suppliers subcontract is 

not a valid measure of contract 

suppliers’ ability to furnish items. 

We note that we have implemented a 

robust monitoring program to track and 

resolve any issues that might occur with 

program implementation and have not 

identified any concerns about contract 

suppliers’ ability to furnish items. To 

date, the data show that Round 1 rebid 

implementation is going very smoothly 

with very few inquiries or complaints. 

For example, the competitive bidding 

call volume at the 1–800–MEDICARE 

call center for the first calendar quarter 

of 2011was less than 0.9 percent of 1– 

800–MEDICARE’s total call volume. 

Most inquiries were about routine 

matters like selecting a contract 

supplier. Also, no changes in 

beneficiary health outcomes resulting 

from the competitive bidding program 

have been observed to date. The 

monitoring program includes: 

• Local, on-the-ground presence in 

each competitive bidding area through 

the CMS regional offices and local 

ombudsmen; 

• A complaint process for 

beneficiaries, caregivers, providers and 

suppliers to use for reporting concerns 

about contract suppliers or other 

competitive bidding implementation 

issues; 

• Contract supplier quarterly reports 

identifying the brands of products they 

furnish; 

• Real-time claims analysis to 

identify utilization trends, monitor 

health outcomes and beneficiary access, 

address aberrancies in services, and 

target potential fraud and abuse; 

• A CMS Competitive Acquisition 

Ombudsman who will respond to 

complaints and inquiries from 

beneficiaries and suppliers about the 

application of the program and will 

issue an annual Report to Congress; 

• Secret shopping; and 

• Beneficiary surveys. 

Comment: Some commenters 

recommended that CMS obtain and 

verify disclosures of both accreditation 

and licensing status of contract 

suppliers and subcontractors prior to 

awarding contracts. 

Response: Regulations at § 414.414 

specify that suppliers must be licensed 

and accredited to be selected for 

contract award. We carefully check all 

bidders during bid evaluation and reject 

any bidders that are not fully licensed 

and accredited. As specified by MIPPA, 

contract suppliers must disclose any 

subcontractors within set time frames 

after contract award; disclosures must 

indicate if the subcontractors meet 

applicable accreditation requirements. 

We check all subcontractor disclosures 

and verify that all applicable 

accreditation requirements have been 

met. If we find that a contract supplier 

has subcontracted with an entity that 

does not meet applicable accreditation 

requirements, we will take appropriate 

action to ensure that the contract 

supplier stops using the subcontractor 

until the subcontractor becomes 

properly accredited. Although MIPPA 

does not require specific disclosure of 

subcontractors’ licensure status, 

contract suppliers, like all suppliers, 

must comply with all State regulatory 

and licensure requirements (see 

§ 424.57(c)(1)((ii)). This would include 

any State regulatory requirements 

regarding applicable subcontractor 

licensure. 

Comment: Many commenters wanted 

CMS to clarify what is considered to be 

a subcontracting relationship between 

the contract supplier and a 

subcontractor with respect to 

accreditation. One commenter wanted 

CMS to provide the industry with a 

framework for entering into 

subcontracts. 

Response: Contract suppliers may 

subcontract to the same extent as any 

other DMEPOS suppliers. The supplier 

standards at § 424.57 set forth 

requirements regarding subcontracting 

arrangements for purchase of inventory, 

delivery and instruction on the use of 

Medicare-covered items, and 

maintenance and repair of rented 

equipment. The quality standards are a 

helpful reference tool in distinguishing 

the role of a primary supplier versus the 

role of a subcontractor as described in 

the supplier standards. We note that 

guidance about subcontracting, 

including guidance about accreditation 

of subcontractors, may be found on the 

National Supplier Clearinghouse Web 

site, http://www.palmettogba.com/nsc 

and the Competitive Bidding 

Implementation Contractor Web site at 

http://www.dmecompetitivebid.com. 

Comment: One commenter believed 

that the accreditation status of a 

subcontractor is irrelevant to the 

contract supplier’s relationship with the 

subcontractor. One commenter did not 

believe that disclosing the subcontractor 

was a part of the MIPPA statute. 

Response: MIPPA sections 154(b)(1) 

and (2) explicitly require subcontractors 

to meet applicable accreditation 

requirements and require contract 

suppliers to disclose their 

subcontracting arrangements within 

specific time frames. We do not have the 

authority to eliminate this requirement. 

After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

d. Exemption From Competitive 

Bidding for Certain DMEPOS 

Section 414.404(b) previously 

exempted from competitive bidding 

certain DME items when furnished by a 

physician or treating practitioner to his 

or her own patients as part of his or her 

professional services. This exception is 

limited to crutches, canes, walkers, 

folding manual wheelchairs, blood 

glucose monitors, and infusion pumps 

that are considered DME. Section 154(d) 

of MIPPA amended section 1847(a) of 

the Act to exclude from the competitive 

bidding program these same items when 

they are furnished by hospitals to the 

hospital’s own patients during an 

admission or on the date of discharge. 

We interpreted this exclusion to include 

only DMEPOS paid for under Part B of 

the Medicare program because section 

1847 does not apply to items that are 

paid for under Part A. As discussed in 

the April 10, 2007 final rule, in 

accordance with § 414.404(b)(3) 

payment for items furnished under the 

exceptions in § 414.404(b) will be made 

in accordance with § 414.408(a). 

We have revised § 414.402 to include 

a definition for hospitals and have 

revised § 414.404(b)(1) to incorporate 

the mandated exemption from the 

competitive bidding program for 

hospitals that furnish certain types of 

competitively bid DME to their own 

patients during an admission or on the 

date of discharge. In addition, we 

amended subparagraph (b)(1)(iii) to 

address the billing requirements for 

hospitals under this exemption. 

Comment: Some commenters 

expressed concern that the MIPPA 

hospital exemption was not more 

expansive. Several commenters 

suggested that CMS reconsider 

including hospital-based suppliers in 

the competitive bidding program. One 

commenter suggested that although 

there is a hospital exemption, hospitals 

may have trouble finding DME 

equipment, such as oxygen, for 

snowbird beneficiaries. A few 

commenters believed that quality of care 

and efficient operations of hospitals 


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would be impacted if they were allowed 

to furnish some items directly to their 

patients while having to arrange with 

contract suppliers for furnishing other 

items not covered by the exemption. 

One commenter suggested that a 

separate competitive bidding process 

should be established for hospital-based 

DME suppliers. 

Response: Section 154(d) of MIPPA 

explicitly described the scope of the 

hospital exemption, so we do not 

believe we have discretion to provide a 

broader exemption. We do not believe 

that separate competitions for suppliers 

that only furnish items to patients in 

hospitals is necessary or would result in 

efficient implementation of the 

requirements of section 1847 of the Act. 

After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

e. Exclusion of Group 3 Complex 

Rehabilitative Power Wheelchairs 

Section 1847(a)(2) of the Act defines 

the items and services subject to 

competitive bidding. Section 

1847(a)(2)(A) of the Act includes DME 

and supplies as items and services 

subject to competitive bidding. Section 

154(a) of the MIPPA amended this 

definition to exclude group 3 complex 

rehabilitative power wheelchairs (and 

related accessories when furnished in 

connection with such wheelchairs) from 

competitive bidding. For Medicare 

coding, coverage, and payment 

purposes, power wheelchairs are 

classified under several groups based on 

performance and durability test results, 

patient weight capacity, and equipment 

handling capabilities. For a description 

of the components, performance 

requirements and coding guidelines for 

group 3 power wheelchairs, see 

https://www.dmepdac.com/resources/ 

articles/2006/08_14_06.pdf. Group 2 

complex rehabilitative power 

wheelchairs were included in Round 1 

rebid of the competitive bidding 

program because they were not 

excluded by the MIPPA. 

We amended § 414.402 to revise the 

definition of ‘‘item’’ to exclude group 3 

complex rehabilitative wheelchairs from 

the competitive bidding program. 

Comment: One commenter agreed that 

the exclusion was good policy because 

the equipment needs to be properly 

designed or it would result in additional 

costs for the government. Another 

commenter believed that the exclusion 

should not be implemented because 

having some power wheelchair 

equipment options subject to 

competitive bidding while others are 

not would promote Medicare fraud. 

Response: The statute explicitly 

excludes Group 3 complex rehabilitative 

power wheelchairs from the competitive 

bidding program, and therefore, we do 

not believe we have any discretion to 

include these items in the program. 

Comment: Some commenters suggest 

that Group 2 complex rehabilitative 

power wheelchairs be excluded from 

the competitive bidding program for 

several reasons. One commenter 

suggested that, if the Group 2 complex 

rehabilitative power wheelchairs are not 

excluded, suppliers should be able to 

bid above the fee schedule amount. 

Another commenter stated that the 

inclusion of Group 2 complex 

rehabilitative power wheelchairs in the 

Round 1 rebid is not envisioned by the 

statute; this commenter did not believe 

that this product category has the 

potential for significant savings. 

Response: The MIPPA excludes 

Group 3 complex rehabilitative power 

wheelchairs from the competitive 

bidding program but also mandates 

rebidding of the ‘‘same items and 

services’’ as the previous Round 1. 

Therefore, we had no discretion to 

exclude 2 complex rehabilitative power 

wheelchairs from the Round 1 rebid 

because these wheelchairs were 

included in the Round 1 competition. 

After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

2. Round 1 Changes to the Competitive 

Bidding Program 

a. Rebidding of the ‘‘Same Areas’’ as the 

Previous Round 1, Unless Otherwise 

Specified 

Section 1847(a)(1)(D)(i)(II) of the Act, 

as amended by section 154(a) of the 

MIPPA, required us to conduct the 

supplier competition for the Round 1 

rebid in 2009. Pursuant to section 

1847(a)(1)(D)(i)(II) of the Act, we 

conducted the competition for the 

Round 1 rebid in a manner ‘‘so that it 

occurs in 2009 with respect to the same 

items and services and the same areas’’ 

as the first Round 1 competition, except 

as provided by section 

1847(a)(1)(D)(i)(III) and (IV) of the Act. 

Under section 1847(a)(1)(D)(i)(III), as 

amended by the MIPPA, we excluded 

Puerto Rico so that the Round 1 rebid 

of the competitive bidding program 

occurred in 9 of the largest MSAs. 

Therefore, the Round 1 rebid occurred 

in the following MSAs: 

• Cincinnati—Middletown (Ohio, 

Kentucky and Indiana) 

• Cleveland—Elyria—Mentor (Ohio) 

• Charlotte—Gastonia—Concord 

(North Carolina and South Carolina) 

• Dallas—Fort Worth—Arlington 

(Texas) 

• Kansas City (Missouri and Kansas) 

• Miami—Fort Lauderdale—Miami 

Beach (Florida) 

• Orlando (Florida) 

• Pittsburgh (Pennsylvania) 

• Riverside—San Bernardino— 

Ontario (California) 

Section 154(a) of MIPPA mandated 

that we conduct the Round 1 ‘‘rebid’’ in 

the ‘‘same areas’’—except for Puerto 

Rico—as the previous competition in 

2007. As stated in the Federal Register 

(72 FR 18016), we identified CBAs in 

the 2007 Round 1 competition by 

counties and zip codes to clearly 

identify the boundaries of a CBA. 

Therefore, we believe it is reasonable to 

implement the ‘‘same areas’’ mandate by 

conducting the Round 1 rebid in those 

same zip codes. Certain zip codes 

changed since the first competition. We 

therefore reviewed zip code changes 

made since 2007 and incorporated 

applicable updates to the zip codes for 

the Round 1 rebid. For example, if a 

particular zip code had been split into 

two new zip codes, we included the 

new zip codes in the CBA. We did not 

add any new zip codes that expanded 

the geographic area of the CBAs. 

Accordingly, we have amended 

§ 414.410(a)(1) to reflect the areas for 

competition set forth in section 

1847(a)(1) of the Act, as amended by the 

MIPPA. 

Comment: Several commenters 

recommended various changes to the 

areas for the Round 1 rebid competition. 

For example, several commenters 

suggested that a few MSAs have rural 

areas and should be excluded from the 

program to prevent patient access and 

quality issues. Some also felt that small 

suppliers would not be able to provide 

items to the rural parts of the MSAs, 

especially with lower reimbursements. 

One commenter suggested that the 

Dallas MSA is too large and should be 

split into two separate CBAs. One 

commenter recommended that CBAs 

should be limited to large cities and not 

divided at a county level. One 

commenter suggested that CMS choose 

different MSAs for the Round 1 rebid 

competition because the original MSAs’ 

suppliers have been affected financially 

from Round 1 and because the suppliers 

that bid in the first round know the 

single payment amounts that were 

selected for those areas and may cause 

bids to be skewed. 

Response: MIPPA explicitly required 

the Round 1 rebid competition to occur 

in the same areas as in the initial Round 

1 competition except for Puerto Rico, 

therefore we do not have any discretion 

to change the areas for the Round 1 

rebid. 


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After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

b. Rebidding of the ‘‘Same Items and 

Services’’ as the Previous Round 1, 

Unless Otherwise Specified 

Section 1847(a)(1)(D)(i)(II) of the Act, 

as amended by the MIPPA, required that 

we conduct the Round 1 rebid 

competitive bidding program with 

respect to the ‘‘same items and services’’ 

as were previously bid in Round 1 

except as provided in section 

1847(a)(1)(D)(i)(IV) of the Act, which 

excludes negative pressure wound 

therapy. The Round 1 rebid also 

excludes group 3 complex rehabilitative 

power wheelchairs as noted previously. 

Therefore, the Round 1 rebid included 

the following categories of items and 

services: 

• Oxygen Supplies and Equipment. 

• Standard Power Wheelchairs, 

Scooters, and Related Accessories. 

• Complex Rehabilitative Power 

Wheelchairs and Related Accessories 

(Group 2). 

• Mail-Order Diabetic Supplies. 

• Enteral Nutrients, Equipment and 

Supplies. 

• Continuous Positive Airway 

Pressure (CPAP), Respiratory Assist 

Devices (RADs), and Related Supplies 

and Accessories. 

• Hospital Beds and Related 

Accessories. 

• Walkers and Related Accessories. 

• Support Surfaces (Group 2 

mattresses and overlays) in Miami. 

In the April 10, 2007 Federal Register 

(72 FR 18084), we define an item, in 

part, as a product included in a 

competitive bidding program that is 

identified by a HCPCS code. 

Therefore, consistent with our 

understanding of the MIPPA and the 

mandate that bidding in the Round 1 

rebid occur with respect to the ‘‘same 

items and services’’ as the previous 

round of competition, we conducted the 

competition for the Round 1 rebid for 

essentially the same codes for which we 

bid in 2007. We have made certain 

adjustments to reflect changes in the 

HCPCS codes consistent with 42 CFR 

414.426. We excluded obsolete codes 

and codes which, in light of the MIPPA 

amendments, are no longer separately 

payable. For example, under the MIPPA, 

the transfer of title provision was 

deleted, thus oxygen accessories are no 

longer separately payable because the 

supplier maintains ownership of the 

equipment. The final list of HCPCS 

codes for the Round 1 rebid was 

published on the Competitive Bidding 

Implementation Contractor (CBIC) Web 

site at http:// 

www.dmecompetitivebidcom. prior to 

opening of the bid window. 

Comment: Some commenters 

suggested that several items should be 

excluded from competitive bidding for a 

variety of reasons. 

Response: The MIPPA specifically 

required us to conduct the Round 1 

rebid competitive bidding program for 

the ‘‘same items and services’’ as were 

previously bid in Round 1 except 

negative pressure wound therapy and 

group 3 complex rehabilitative power 

wheelchairs, and therefore, we had no 

discretion to exclude these items from 

the Round 1 rebid. 

Comment: One commenter agreed 

with the statutory exclusion of negative 

pressure wound therapy (NPWT) for the 

Round 1 rebid and suggested that it be 

excluded entirely from competitive 

bidding. 

Response: Although MIPPA excluded 

NPWT from the Round 1 rebid, it did 

not provide a permanent exclusion from 

the competitive bidding program. The 

statute mandates competitive bidding 

for most items of DME, including NPWT 

equipment and supplies. CMS has 

decided to utilize the flexibility 

provided by the statute to phase in 

items under the program beginning with 

high cost or high volume items. The 

average monthly rental fee schedule 

amount for the NPWT pump is currently 

$1,558, meaning the beneficiary pays at 

least $312 per month on average for 

rental of this device. By comparison, the 

average monthly fee and corresponding 

coinsurance amount for a respiratory 

suction pump is $46 (monthly fee) and 

$9 (monthly coinsurance). A study 

conducted in 2009 by the Office of 

Inspector General for the Department of 

Health and Human Services found that 

suppliers purchase these pumps for 

significantly less, $3,604 on average, 

than Medicare pays over 13 months, 

currently $16,359. The savings potential 

for the Medicare program and 

beneficiary for this item is therefore 

very significant. Medicare allowed 

charges for NPWT equipment and 

supplies were approximately $178 

million in 2010, making this a high 

volume and high cost item as well. 

We note that section 154 (c) (3) of 

MIPPA required the Secretary of the 

Department of Health and Human 

Services (DHHS) to perform an 

evaluation of the Healthcare Common 

Procedure Coding System (HCPCS) 

coding decisions for NPWT devices. 

CMS requested this report from The 

Technology Assessment Program (TAP) 

at the Agency for Healthcare Research 

and Quality (AHRQ). AHRQ determined 

that there are no significant therapeutic 

distinctions among NPWT devices. 

Because there are no significant 

differences among NPWT products, the 

current HCPCS codes are adequate and 

do not need to be updated or changed. 

The study results are available on the 

AHRQ Web site at: http:// 

www.ahrq.gov/clinic/ta/negpresswtd/ 

npwtd01.htm. 

After consideration of the public 

comments received, we are finalizing 

this provision without modification. 

D. Other Public Comments Received on 

the January 16, 2009 Interim Final Rule 

We ordinarily publish a notice of 

proposed rulemaking in the Federal 

Register to provide for public comment 

before the provisions of a rule take effect 

in accordance with section 553(b) of the 

Administrative Procedure Act (APA) 

and section 1871 of the Act. This 

process may be waived, however, if an 

agency finds good cause that a notice 

and comment procedure is 

impracticable, unnecessary, or contrary 

to the public interest. We found good 

cause to waive notice and comment 

rulemaking because we simply 

conformed the competitive bidding 

regulations to specific, detailed, and 

proscriptive statutory provisions. 

The comments we received on the 

waiver of proposed rulemaking and our 

responses are set forth below. 

Comment: Several commenters 

believed that CMS should have engaged 

in notice and comment rulemaking to 

implement MIPPA provisions rather 

than issuing an interim final rule with 

comment period for several reasons. 

One reason was so that stakeholders 

would have sufficient time and 

opportunity to give input on the 

program. The second reason was 

because commenters wanted to ensure 

that comments received during the 

comment period would be taken into 

account before any final rule was 

published. The third reason commenters 

wanted CMS to conduct a notice and 

comment rulemaking was because 

commenters felt that important issues 

were left unaddressed in the interim 

final rule such as how the program 

would be impacted by the changes that 

were made by MIPPA, lessons learned 

from Round 1, and supplier and 

beneficiary concerns and suggestions 

from Round 1. Commenters felt that 

CMS should address major issues in 

notice and comment rulemaking instead 

of using of subregulatory guidance and 

Web site postings. 

Response: As we explained in the 

interim final rule, under the waiver of 

proposed rulemaking, we ordinarily 

publish a notice of proposed rulemaking 

to provide for public comment before 

provisions of a rule take effect, but the 


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process may be waived if the agency 

finds good cause that a notice and 

comment procedure is impracticable, 

unnecessary, or contrary to public 

interest. Because CMS issued the rule to 

conform to the specific statutory 

requirements contained in section 154 

of the MIPPA it was impractical, 

unnecessary, and contrary to public 

interest to use notice and comment 

rulemaking to incorporate these 

provisions into regulations. As 

indicated earlier in this preamble, we 

also made process improvements to 

ensure compliance with the statute that 

did not require notice and comment 

rulemaking before we conducted the 

Round 1 rebid. Finally, we agree that 

substantive issues should be addressed 

through notice and comment 

rulemaking consistent with the 

Administrative Procedure Act and note 

that we used notice and comment 

rulemaking to implement non-selfimplementing provisions of MIPPA (see 

75 FR 73170 (November 29, 2010). 

Comment: A few commenters 

disagreed with the statement in the 

interim final rule that MIPPA ‘‘did not 

alter fundamental requirements * * * 

used by us in * * * selecting suppliers 

under the program’’. Some of the 

commenters believed that the interim 

final rule is not self-implementing and 

was not clear or understandable. 

Response: We continue to believe as 

discussed in the interim final rule that 

the provisions of MIPPA included in the 

interim final rule were selfimplementing. The language in these 

provisions was highly detailed and 

proscriptive and did not provide 

options for discretionary revisions. 

V. Collection of Information 

Requirements 

A. Legislative Requirement for 

Solicitation of Comments 

Under the Paperwork Reduction Act 

of 1995, we are required to provide 60- 

day notice in the Federal Register and 

solicit public comment before a 

collection of information requirement is 

submitted to the Office of Management 

and Budget (OMB) for review and 

approval. In order to fairly evaluate 

whether an information collection 

should be approved by OMB, section 

3506(c)(2)(A) of the Paperwork 

Reduction Act of 1995 requires that we 

solicit comment on the following issues: 

• The need for the information 

collection and its usefulness in carrying 

out the proper functions of our agency. 

• The accuracy of our estimate of the 

information collection burden. 

• The quality, utility, and clarity of 

the information to be collected. 

• Recommendations to minimize the 

information collection burden on the 

affected public, including automated 

collection techniques. 

Because we did not receive any 

comments for the ESRD PPS, we are 

finalizing the collection of information 

section as proposed. 

B. Requirements in Regulation Text 

We solicited public comment on the 

issues below for the following sections 

of this document that contain 

information collection requirements 

(ICRs): 

As discussed in section I.B.3 of this 

final rule, to receive the low-volume 

adjustment, an ESRD facility would 

need to provide an attestation to their 

Fiscal Intermediary or Medicare 

Administrative Contractor (FI/MAC) 

that it has met the criteria to qualify as 

a low-volume facility no later than 

November 1st of each year preceding the 

applicable low-volume adjustment 

payment year (except for the 2012 lowvolume payment year, which has an 

attestation submission deadline of 

January 3, 2012). The FI/MAC would 

verify the ESRD facility’s attestation of 

their low-volume status for the 3- 

consecutive years immediately 

preceding the payment year, using the 

ESRD facility’s most recent final-settled 

or as-filed 12-month cost reports. 

The burden associated with the 

requirement is the time and effort 

necessary for an ESRD facility attesting 

as a low-volume facility to develop an 

attestation and submit it to their FI/ 

MAC. In the proposed rule, we 

estimated that it would require an 

administrative staff member from each 

low-volume facility 10 minutes to 

obtain the total number of treatments in 

the cost reports necessary for eligibility 

determination, develop the attestation, 

and submit it to their FI/MAC. For this 

final rule, using 2010 claims our 

contractor, UM–KECC, identified 963 

ESRD facilities as providing treatments 

below the low-volume threshold of 

4,000 treatments in 2010. Of these 963 

facilities, we estimated that 378 met the 

additional low-volume criteria as 

specified in § 413.232. Further, due to 

the historical trend of increase in the 

number of small dialysis facilities, we 

believe that several dozen additional 

ESRD facilities may meet the criteria of 

a low-volume facility prior to the CY 

2012 payment year. To take these 

facilities into account, we have rounded 

the total number of estimated lowvolume facilities to 400. Therefore, for 

CY 2012, we estimate that the total 

initial ESRD facility burden would be 67 

hours. The estimated cost associated 

with compliance with this requirement 

is $2.61 per ESRD facility and a total of 

$1,044 for all 400 facilities. These costs 

are estimated using the 2010 estimate 

for the occupational code 43–0000 

Office and Administrative Support 

Occupation mean hourly wage of $15.66 

as stated by the U.S. Bureau of Labor 

Statistics. 

C. Additional Information Collection 

Requirements 

This final rule imposes collection of 

information requirements as outlined in 

the regulation text and specified above. 

However, this final rule also makes 

reference to several associated 

information collections that are not 

discussed in the regulation text 

contained in this document. The 

following is a discussion of these 

information collections, some of which 

have already received OMB approval. 

1. Display of Certificates for the PY 2013 

and PY 2014 ESRD QIP 

Section II.B of this rule discusses a 

disclosure requirement for both the PY 

2013 and the PY 2014 ESRD QIP. As 

stated earlier in this final rule, section 

1881(h)(6)(C) of the Act requires the 

Secretary to provide certificates to 

dialysis care providers and facilities 

about their total performance scores 

under the ESRD QIP. This section also 

requires each provider and facility that 

receives a QIP certificate to display it 

prominently in patient areas. 

To comply with this requirement, we 

proposed to issue a PY 2013 and PY 

2014 ESRD QIP certificate to providers 

and facilities via a generally accessible 

electronic file format. We proposed that 

each provider and facility would be 

required to prominently display the 

applicable ESRD QIP certificate in 

patient areas. In addition, we proposed 

that each provider and facility would 

take the necessary measures to ensure 

the security of the certificate in the 

patient areas. Finally, we proposed that 

each provider/facility would be required 

to have staff available to answer 

questions about the certificate in an 

understandable manner, taking into 

account that some patients might have 

limited English proficiency. These 

proposals represent no change from the 

policy finalized for the PY 2012 ESRD 

QIP, and we are finalizing them in this 

final rule. 

The burden associated with the 

aforementioned requirements is the time 

and effort necessary for providers and 

facilities to print the applicable ESRD 

QIP certificate, display the certificate 

prominently in patient areas, ensure the 

safety of the certificate, and respond to 

patient inquiries in reference to the 

certificates. We estimate that 


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approximately 5,503 providers and 

facilities will receive an ESRD QIP 

certificate in PY 2013 and PY 2014 and 

will be required to display it. We also 

estimate that it will take each provider/ 

facility 10 minutes per year to print, 

prominently display, and secure the 

ESRD QIP certificate, for a total 

estimated annual burden of 917 hours 

[(10/60) hours × 5503 facilities] at a cost 

of $31, 755 [917 hours × $34.63 per 

hour]. We estimate that approximately 

one-third of ESRD patients (estimated to 

be 119,686 out of 395,058) will ask a 

question about the ESRD QIP certificate. 

We further estimate that it will take 

each provider/facility approximately 5 

minutes to answer each patient question 

about the applicable ESRD QIP 

certificate, or 1.8 hours per provider or 

facility each year. The total estimated 

annual burden associated with this 

requirement is 9,905 hours [1.8 hours × 

5503 providers]. The total estimated 

annual burden for both displaying the 

ESRD QIP certificates and answering 

patient questions about the certificates 

is 10,822 hours [10,822 hours + 9,905 

hours] (for each of PY 2013 and PY 

2014). While the total estimated annual 

burden associated with both of these 

requirements as discussed is 10,822 

hours, we do not believe that there will 

be a significant cost associated with 

these requirements because we are not 

proposing to require providers/facilities 

to complete new forms. As discussed in 

section A.1.3 of this final rule, we 

estimate that the total cost for all ESRD 

providers/facilities to comply with the 

collection of information requirements 

associated with the certificate each year 

would be less than $400,000. 

We did not receive any public 

comments regarding our analysis of the 

economic impact of the collection of 

information requirement for this 

proposal. 

2. NHSN Reporting Requirement for the 

PY 2014 ESRD QIP 

As stated above in section II.B.2.b.vi 

of this final rule, we are finalizing a 

proposal to include reporting dialysis 

events to the National Healthcare Safety 

Network (NHSN) as a reporting measure 

for the PY 2014 ESRD QIP. Specifically, 

we are requiring providers/facilities to: 

(1) Enroll in the NHSN and complete 

required training as verified by a digital 

certificate obtained from CDC; and (2) 

submit at least 3-consecutive months of 

dialysis event data to the NHSN. 

The burden associated with these 

requirements is the time and effort 

necessary for providers and facilities to 

enroll in the NHSN and conduct the 

required training and submit 3 months 

of data. We estimated in the proposed 

rule that approximately 5,503 providers 

and facilities will enroll in the NHSN 

and submit the necessary data. We also 

estimated that it would take each 

provider or facility 48 hours per year to 

enroll in the NHSN and complete the 

required training, for a total estimated 

annual burden of 264,144 hours [5,503 

providers × 48 hours]. Upon further 

consultation with the CDC, we have 

now revised this estimate. We now 

believe that it will take each provider/ 

facility approximately 8 hours to enroll 

in the NHSN and complete the required 

training, for a total estimated burden of 

44,024 hours (8 hours × 5,503 facilities). 

Based on the Bureau of Labor Statistics 

we estimate the average salary to be 

$34.63 per hour. Thus, average cost for 

each provider/facility will be $277.04 (8 

hours × $34.63 per hour). Across all 

5,503 providers/facilities, this will equal 

approximately $1.5 million ($277.04 × 

5,503 facilities). However, we further 

estimate that the number of dialysis 

events in a 3-month period will be 

125,680 for the 2014 ESRD population. 

We estimate it will require 2 hours of 

staff time per month to collect and 

submit data on these events and the 

estimated burden for submitting 3 

months of data will be 33,018 hours (6 

hours times 5,503 facilities). If the 

dialysis events are distributed evenly 

across all 5,503 providers/facilities, that 

will result in an additional 6-hour 

burden ($218.58 (6 hours times $36.43)) 

for each provider/facility. Based upon 

our updated analysis, the total estimated 

annual burden for enrolling in the 

NHSN, conducting the required 

training, and submitting 3-consecutive 

months of data is 77,042 hours (44,024 

+ 33,018). We estimate that the total cost 

for all ESRD providers/facilities to 

comply with the collection of 

information requirements associated 

with NHSN reporting requirement each 

year will be less than $2.8 million 

(77,042 × $36.43), with the total average 

cost per provider/facility approximately 

$508.80 ($2.8 million/5,503 facilities). 

We did not receive any public 

comments regarding our proposed 

analysis of the economic impact of the 

collection of information requirements 

related to the adoption of an NHSN 

reporting measure for the PY 2014 ESRD 

QIP. 

3. Patient Experience Survey Usage 

Requirement for the PY 2014 ESRD QIP 

As stated above in section B.A.2. of 

this final rule, we are finalizing our 

proposal to include a measure that 

assesses provider/facility usage of the 

In-Center Hemodialysis (ICH) Consumer 

Assessment of Healthcare Providers and 

Systems (CAHPS) Survey as a reporting 

measure for the PY 2014 ESRD QIP. The 

burden associated with this requirement 

is the time and effort necessary for 

providers and facilities to administer 

the ICH CAHPS survey and submit an 

attestation to CMS that they successfully 

administered the survey. 

We estimate that approximately 5,503 

providers and facilities will administer 

the ICH CAHPS survey and submit an 

attestation to that affect. We estimate 

that it will take each provider or facility 

16 hours per year to be trained on the 

survey features. We further estimate that 

it will take each provider/facility 

approximately 5 minutes to submit the 

attestation each year. The estimated 

total annual burden on providers/ 

facilities is estimated to be 88,507 hours 

[(5,503 providers × 16 hours) + (5,503 

providers × (5/60) hours)] which is 

valued at $3 million [88,507 hours × 

$34.63 per hour], or $556.97 per 

provider/facility [$3 million/5,503 

providers]. We estimate that 

administering the survey would take a 

third-party entity 45 minutes per patient 

(to account for variability in education 

levels) and 200 surveys per year which 

equals 150 hours [(45/60) hours × 200 

surveys] or $2,707.32 [150 hours × 

$17.58 per hour] per facility-year to 

administer the ICH CAHPS survey for 

an estimated annual burden of 825,450 

hours (150 hours × 5,503 providers) 

which is valued at $14.5 million 

($2,637.00 × 5,503 providers). As 

discussed in section A. of this final rule, 

we estimate that the total cost for ESRD 

providers/facilities to comply with the 

collection of information requirements 

associated with administering the ICH 

CAHPS survey each year will be 

approximately $3,193.97 [$556.97 + 

$2,637.00] or $17.5 million [$3 million 

+ $14.5 million] across all ESRD 

providers/facilities. 

We did not receive any public 

comments regarding the proposed 

collection of information requirements 

associated with our adoption of this 

measure for the PY 2014 ESRD QIP. 

4. Mineral Metabolism Reporting 

Requirement for the 2014 ESRD QIP 

As stated above in section B.A.2 of 

this final rule, we are finalizing our 

proposal to include a Mineral 

Metabolism reporting measure as part of 

the PY 2014 ESRD QIP. The burden 

associated with this requirement is the 

time and effort necessary for providers 

and facilities to review their records and 

submit an attestation to CMS that they 

had monitored on a monthly basis the 

serum calcium and serum phosphorus 

levels of all patients each month. 

We estimate that approximately 5,503 

providers and facilities will submit the 


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attestation. We estimate that it will take 

each provider or facility approximately 

18 hours to review its records and 

submit the attestation each year. The 

estimated total annual burden on 

providers/facilities is estimated to be 

99,054 hours [18 hours × 5,503 

providers] which is valued at $3.43 

million [99,054 hours × $34.63 per 

hour], or $623 per provider/facility 

[$3.43 million/5,503 providers]. 

We did not receive any public 

comments regarding our proposed 

collection of information requirements 

associated with the adoption of a 

mineral metabolism reporting measure 

for the PY 2014 ESRD QIP. 

5. Competitive Acquisition Program for 

Certain Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) Collection of Information 

Requirements 

We solicited public comment on the 

following information collection 

requirements (ICRs): 

i. ICRs Regarding Round 1 Rebid 

We previously estimated that the 

burden associated with Round 1 would 

be 1,086,164 hours (68 hours × 15,973 

bids). Our estimate was that on average 

it would take a supplier 68 hours to 

complete and submit a bid and that we 

would receive 15,973 bids. Although we 

expect the amount of hours to generally 

remain the same (68 hours) for the 

Round 1 rebid, based on our Round 1 

experience we anticipated fewer bids. 

For the 2007 Round 1 of the competitive 

bidding program, we received 

approximately 6,500 bids. Therefore, the 

total estimated burden associated with 

the Round 1 rebid was approximately 

442,000 hours (68 hours × 6,500). 

ii. ICRs Regarding Disclosure of 

Subcontracting Arrangements 

Section 414.422(f) states that 

suppliers entering into a contract with 

CMS must disclose information on each 

subcontracting arrangement that the 

supplier has to furnish items and 

services under the contract and whether 

each subcontractor meets the 

accreditation requirements in section 

424.57, if applicable. Section 414.422(f) 

also requires that the required 

disclosure be made no later than 10 

days after the date a supplier enters into 

a contract with CMS or 10 days after a 

supplier enters into a subcontracting 

arrangement after entering into a 

contract with CMS. 

The burden associated with the 

requirements in § 414.422(f) is the time 

and effort necessary to disclose the 

information to CMS. In the 2007 Round 

1 competition, there were 329 winning 

suppliers. Therefore, we approximated 

fewer than 400 winning suppliers for 

the Round 1 rebid. Also, we estimated 

it will take each of the winning 

suppliers that use subcontractors on 

average approximately 1.5 hours to 

submit information on each 

subcontracting arrangement to furnish 

items and services under the contract 

and whether each subcontractor meets 

the accreditation requirements in 

§ 424.57, if applicable. Those that do not 

use subcontractors will not have a 

reporting burden. The total estimated 

burden associated with these 

requirements is approximately 600 

hours (1.5 hours × 400 winning 

suppliers). 

We did not receive any comments on 

the information collection requirements 

of the interim final rule. We sought 

comments on these information 

collection requirements again in the 

May 19, 2009 Federal Register (74 FR 

23415), and the Office of Management 

and Budget (OMB) approved the 

collection (OMB Control Number 0938– 

1016). 

VII. Economic Analyses 

A. Regulatory Impact Analysis 

1. Introduction 

We examined the impacts of this final 

rule as required by Executive Orders 

12866 (September 30, 1993, Regulatory 

Planning and Review) and Executive 

Order 13563 on Improving Regulation 

and Regulatory Review (January 18, 

2011). Executive Orders 12866 and 

13563 direct agencies to assess all costs 

and benefits of available regulatory 

alternatives and, if regulation is 

necessary, to select regulatory 

approaches that maximize net benefits 

(including potential economic, 

environmental, public health and safety 

effects, distributive impacts, and 

equity). Executive Order 13563 

emphasizes the importance of 

quantifying both costs and benefits, of 

reducing costs, of harmonizing rules, 

and of promoting flexibility. This rule 

has been designated an ‘‘economically’’ 

significant rule, under section 3(f)(1) of 

Executive Order 12866. Accordingly, 

the rule has been reviewed by the Office 

of Management and Budget. We have 

prepared a Regulatory Impact Analysis 

that to the best of our ability presents 

the costs and benefits of the final rule. 

We solicited comments on the 

regulatory impact analysis provided. 

2. Statement of Need 

This rule finalizes a number of 

routine updates for renal dialysis 

services in CY 2012, implementing the 

second year of the transition, and makes 

several policy and technical changes to 

the CY 2011 ESRD PPS final rule. This 

includes updates to the ESRD PPS and 

composite rate base rates, wage index 

values, wage index budget-neutrality 

adjustment factors, outlier payment 

policy, low-volume adjustment and 

transition budget-neutrality adjustment. 

Failure to publish this final rule would 

result in ESRD facilities not receiving 

appropriate payments in CY 2012. 

In addition, this rule will implement 

a QIP for Medicare ESRD dialysis 

providers and facilities with payment 

reductions beginning January 1, 2013. 

Under section 1881(h) of the Act, after 

selecting measures, establishing 

performance standards that apply to 

each of the measures, specifying a 

performance period, and developing a 

methodology for assessing the total 

performance of each provider and 

facility based on the specified 

performance standards, the Secretary is 

required to apply an appropriate 

reduction to ESRD providers and 

facilities that do not meet or exceed the 

established total performance score. Our 

vision is to continue to implement a 

robust, comprehensive ESRD QIP that 

builds on the foundation that has 

already been established in providing 

incentives to providers/facilities to 

improve the quality of care they provide 

to Medicare beneficiaries. 

Also, this final rule will revise the 

ambulance fee schedule regulations to 

conform to the requirements of section 

106 of the Medicare and Medicaid 

Extenders Act of 2010 Public Law 111– 

309 (MMEA). This final rule also revises 

the definition of durable medical 

equipment. The revision adds a 3-year 

MLR that must be met by an item or 

device in order to be considered durable 

for the purpose of classifying the item 

under the Medicare benefit category for 

DME. The proposed rule would not 

impact items classified and covered as 

DME before the new rule takes effect or 

supplies and accessories used with 

covered DME. Finally, this final rule 

incorporates into regulations certain 

self-implementing provisions of section 

154 of MIPPA that affect the DMEPOS 

Competitive Bidding Program. 

3. Overall Impact 

We estimate that the final revisions to 

the ESRD PPS will result in an increase 

of approximately $240 million in 

payments to ESRD facilities in CY 2012. 

Furthermore, as a result of 

implementing the ESRD QIP for 

Medicare outpatient ESRD dialysis 

providers and facilities, we estimate 

aggregate payment reductions in 

payment years 2013 and 2014 would be 

$23.7 million and $22.1 million, 


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respectively. However, given the lack of 

data for several measures, the actual 

impact of the PY 2014 ESRD QIP may 

vary significantly from the values 

provided herein. Lastly, the aggregate 

costs associated with the QIP collection 

of information requirements described 

in section III.1 of this final rule (Display 

of Certificates for the 2013 ESRD QIP) 

are estimated to be $400,000 for all 

ESRD providers/facilities in PY 2013. 

The additional estimated aggregate costs 

associated with the collection of 

information requirements described in 

sections III.1. (Display of Certificates for 

the PY 2013 and PY 2014 ESRD QIP), 

III.2 (NHSN Reporting Requirement for 

the PY 2014 ESRD QIP), III.3 (Patient 

Experience Survey Usage Requirement 

for the PY 2014 ESRD QIP) and III.4 

(Mineral Metabolism Reporting 

Requirement for the PY 2014 ESRD QIP) 

in this final rule are expected to be 

approximately less than $24 million for 

all participating ESRD facilities. 

The impact of section 106 of the 

MMEA, requiring the extension of 

certain add-on payments for ground 

ambulance services, and the extension 

of certain rural area designations for 

purposes of air ambulance payment, 

through CY 2011, is estimated to be $20 

million (for CY 2011). 

The fiscal impact of the proposed 3- 

year MLR cannot be estimated because 

it is difficult to predict how many 

different types of devices will be 

introduced in the market in the future 

that may or may not qualify as DME 

items as a result of the new rule. We 

would expect that this final rule would 

have a small, if any, savings impact on 

the program. 

Finally, we believe that the changes to 

the Medicare DMEPOS Competitive 

Bidding Program have a minimal fiscal 

impact because they are very limited 

and do not change fundamental program 

requirements. 

B. Detailed Economic Analysis 

1. CY 2012 End-Stage Renal Disease 

Prospective Payment System 

a. Effects on ESRD Facilities 

As explained in the proposed rule (76 

FR 40542), to understand the impact of 

the changes affecting payments to 

different categories of ESRD facilities, it 

is necessary to compare estimated 

payments (that is, payments made under 

the 100 percent ESRD PPS and those 

under the blended payment during the 

transition) in CY 2012 to estimated 

payments (that is, payments made under 

the 100 percent ESRD PPS and those 

under the ESRD PPS blended payment 

during the transition) in CY 2011. To 

estimate the impact among various 

classes of ESRD facilities, it is 

imperative that the estimates of 

payments in CY 2011 and CY 2012 

contain similar inputs. Therefore, we 

simulated payments only for those 

ESRD facilities that we are able to 

calculate both current payments and 

new payments. 

For this final rule, we used the June 

2011 update of CY 2010 National Claims 

History file as a basis for Medicare 

dialysis treatments and payments under 

the ESRD PPS. We updated the 2010 

claims to 2011 and 2012 using various 

updates. The updates to the ESRD PPS 

base rate and the base composite rate 

portion of the blended rate during the 

transition are described in section I.B of 

this final rule. In addition, in order to 

prepare an impact analysis, since some 

providers opted to be paid the blended 

payment amount during the transition, 

we made various assumptions about 

price growth for the formerly separately 

billable drugs and laboratory tests with 

regard to the composite portion of the 

ESRD PPS blended payment during the 

transition. These rates of price growth 

are briefly outlined below, and are 

described in more detail in the CY 2011 

ESRD PPS final rule (75 FR 49078 

through 49080). 

We used the CY 2010 amounts for the 

CY 2011 and CY 2012 amounts for 

Supplies and Other Services, since this 

category primarily includes the $0.50 

administration fee for separately billable 

part B drugs and this fee is not 

increased; thus we used no price 

update. Because some ESRD facilities 

will receive blended payments during 

the transition and receive payment for 

ESRD drugs and biologicals based on 

their average sales price plus 6 percent 

(ASP+6), we estimated price growth for 

these drugs and biologicals based on 

ASP+6 percent. We updated the last 

available quarter of actual ASP data for 

the top twelve drugs (the fourth quarter 

of 2011) thru 2012 by using the 

quarterly growth in the Producer Price 

Index (PPI) for Drugs, consistent with 

the method for addressing price growth 

in the ESRDB market basket. This 

resulted in 1.7 percent, 1.4 percent, 1.1 

percent, and 0.8 percent increase, 

respectively, for the first thru the fourth 

quarter of 2012. Since the top twelve 

drugs account for over 99 percent of 

total former separately billable Part B 

drug payments, we used a weighted 

average growth of the top twelve drugs, 

for the remainder. Table 7 below shows 

the updates used for the drugs. 

We updated payments for laboratory 

tests paid under the laboratory fee 

schedule to 2011 and 2012 using the 

statutory required update of the CPI–U 

increase with any legislative 

adjustments. For this final rule, the 

growth from 2010 to 2011 is ¥1.8 

percent and the growth from 2010 to 

2012 is ¥1.2 percent. 

BILLING CODE 4120–01–P 


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Table 8 shows the impact of the 

estimated CY 2012 ESRD payments 

compared to estimated payments to 

ESRD facilities in CY 2011. 


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BILLING CODE 4120–01–C 

Column A of the impact table 

indicates the number of ESRD facilities 

for each impact category and column B 

indicates the number of dialysis 

treatments (in millions). The overall 

effect of the final changes to outlier 

payment policy and the final changes 

for the BSA national average described 

in section I.C.10 and section .I.C.9, 

respectively, of this final rule, are 

shown in column C. For CY 2012, the 

impact on all facilities as a result of the 

changes to outlier payment policy and 

the BSA national average would be a 0.3 

percent increase in estimated payments. 

The estimated impact of the changes to 

outlier payment policy and the BSA 

national average ranges from ¥0.1 

percent decrease to a 0.5 percent 

increase. Most ESRD facilities are 

anticipated to experience a positive 

effect in their estimated CY 2012 

payments as a result of the outlier 

policy and BSA national average 

changes being finalized. 

Column D shows the effect of the 

wage index on ESRD facilities and 

reflects the CY 2012 wage index values 

for the composite rate portion of the 

blended payment during the transition 

and the ESRD PPS payments. Facilities 

located in the census region of Puerto 

Rico and the Virgin Islands would 

receive a 2.4 percent decrease in 

estimated payments in CY 2012. Since 

most of the facilities in this category are 

located in Puerto Rico, the decrease is 

primarily due to the reduction in the 

wage index floor (which only affects 

facilities in Puerto Rico in CY 2012). 

Renal dialysis facilities outside of 

Puerto Rico would experience changes 

in estimated payments ranging from a 

0.4 percent decrease to a 0.9 percent 

increase due to the update of the wage 

index. 

Column E reflects the overall impact 

(that is the effects of the outlier policy 

and BSA national average changes, the 

wage index, the effect of the ESRDB 

market basket increase minus 

productivity adjustment, and the effect 

of the change in the blended payment 

percentage from 75 percent of payments 

based on the composite rate system and 

25 percent based on the ESRD PPS in 

2011, to 50/50, respectively, for 2012, 

for those facilities that opted to be paid 

under the transition). We expect that 

overall, ESRD facilities will experience 

a 2.5 percent increase in estimated 

payments in 2012. ESRD facilities in 

Puerto Rico are expected to receive a 0.3 

percent increase in their estimated 

payments in CY 2012. This negligible 

increase is primarily due to the negative 

impact of the wage index. The 

remainder of ESRD facilities are 

expected to be positively impacted 

ranging from an increase of 1.7 percent 

to 3.6 percent in their 2012 estimated 

payments. 

b. Effects on Other Providers 

Under the ESRD PPS, ESRD facilities 

are paid directly for the renal dialysis 

bundle and other provider types such as 

laboratories, DME suppliers, and 

pharmacies, may no longer bill 

Medicare directly for renal dialysis 

services. Rather, effective January, 1, 

2011, such other providers can only 

furnish renal dialysis services under 

arrangements with ESRD facilities and 

must seek payment from ESRD facilities 

rather than Medicare. Under the ESRD 

PPS, Medicare pays ESRD facilities one 

payment for renal dialysis services, 

which may have been separately paid to 

suppliers by Medicare prior to the 

implementation of the ESRD PPS. 

Therefore, in CY 2012, the second year 

of the ESRD PPS, we estimate that the 

ESRD PPS will have zero impact on 

these other providers. 

c. Effects on the Medicare Program 

We estimate that Medicare spending 

(total Medicare program payments) for 

ESRD facilities in 2012 will be 

approximately $8.2 billion. This 

estimate is based on various price 

update factors discussed in section VII.B 

in this final rule. In addition, we 

estimate that there will be an increase 

in fee-for-service Medicare beneficiary 

enrollment of 4.3 percent in CY 2012. 

d. Effects on Medicare Beneficiaries 

Under the ESRD PPS, beneficiaries are 

responsible for paying 20 percent of the 

ESRD PPS payment amount or blended 

payment amount for patients treated in 

facilities going through the ESRD PPS 

transition. As a result of the projected 

2.5 percent overall increase in the ESRD 

PPS payment amounts in CY 2012, we 

estimate that there will be an increase 

in beneficiary co-insurance payments of 

2.5 percent in CY 2012, which translates 

to approximately $50 million. 

e. Alternatives Considered 

As we explained in the proposed rule 

(76 FR 40544), we considered 

eliminating all laboratory tests from the 

outlier policy, but instead we proposed 

to eliminate only the Automated MultiChannel Chemistry (AMCC) panel tests. 

We indicated that we believed this 

approach would continue to recognize 

expensive laboratory tests in the outlier 

policy while reducing the burden 

associated with the 50 percent rule. We 

also considered alternatives for applying 

the wage index budget-neutrality 

adjustment factor under the ESRD PPS 

for purposes of the full ESRD PPS 

payments and ESRD PPS portion of the 

blended payment during the transition, 

such as applying the wage index budgetneutrality adjustment factor to the ESRD 

PPS wage index values. We chose to 

apply the wage index budget-neutrality 

adjustment factor to the ESRD PPS base 


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rate and ESRD PPS portions of the 

transition blended payment to be 

consistent with how these adjustments 

are applied in other Medicare payment 

systems. Finally, we considered 

retaining the current BSA adjustment 

under the composite rate potion of the 

blended payment amount. 

2. End-Stage Renal Disease Quality 

Incentive Program 

a. Effects of the PY 2013 and PY 2014 

ESRD QIP 

This final rule is intended to mitigate 

possible reductions in the quality of 

ESRD dialysis facility services provided 

to beneficiaries as a result of payment 

changes under the ESRD PPS by 

implementing an ESRD QIP that would 

reduce ESRD payments by up to 2 

percent to dialysis providers/facilities 

that fail to meet or exceed a Total 

Performance Score with respect to 

performance standards established by 

the Secretary with respect to certain 

specified measures. 

The methodology that we are 

finalizing to determine a provider/ 

facility’s Total Performance Score is 

described in section IV.A.3 

(Methodology for Calculating the Total 

Performance Score for the PY 2013 

ESRD QIP) and section IV.A.2.e 

(Methodology for Calculating the Total 

Performance Score for the PY 2014 

ESRD QIP) of this final rule. Any 

reductions in ESRD payment would 

begin on January 1, 2013 for services 

furnished on or after January 1, 2013 for 

the PY 2013 ESRD QIP and any 

reductions in ESRD payment would 

begin on January 1, 2014 for services 

furnished on or after January 1, 2014 for 

the PY 2014 ESRD QIP. 

As a result, based on the ESRD QIP 

outlined in this final rule, we estimate 

that approximately 19 percent or 1,014 

of total ESRD dialysis providers/ 

facilities would likely receive a payment 

reduction for PY 2013. In PY 2014, we 

estimate that approximately 30.3 

percent or 1,665 of total ESRD facilities 

would likely receive some type of 

payment reduction. We note that these 

estimates differ significantly from the 

estimates that were included in the 

proposed rule. We believe that the 

difference in our PY 2013 estimates is 

attributable to two changes. First, we 

determined that our previous estimates 

for PY 2013 had mistakenly included 

the Hemoglobin Less Than 10 g/dL 

measure, which resulted in lower 

provider/facility scores and greater 

payment reductions. Second, we are 

now able to update our PY 2013 

estimates using newly available data, 

such that we are now using 2009 data 

as the baseline period and 2010 data as 

the performance period. We believe that 

the difference in our PY 2014 estimates 

is attributable to four changes that were 

made to how we calculated the estimate. 

First, as previously mentioned, we are 

now able to update our estimates using 

newly available data, such that we are 

now using 2009 data as the baseline 

period and 2010 data as the 

performance period. Second, our 

estimates no longer include 

performance on the proposed SHR 

measures, because we are not finalizing 

its inclusion in the PY 2014 program. 

Third, our estimate now uses data from 

the Fistula First Breakthrough Initiative 

to approximate provider/facility 

performance on the Vascular Access 

Type (VAT) measure proposed for the 

2014 QIP. The 2014 QIP will use data 

from Medicare claims based on HCPCS 

modifier V-codes that indicate fistula or 

catheter use. Because sufficient 

historical data are not yet available from 

Medicare claims for the fistula and 

catheter rates that will be used to 

calculate the VAT, historical data 

regarding fistula and catheter use were 

obtained from the Fistula First 

Breakthrough Initiative dataset for use 

in this impact analysis. For more 

information on the Fistula First Dataset, 

please see http://www.fistulafirst.org.. 

Lastly, our estimates incorporate the 

changes to the proposed payment 

reduction methodology that have been 

finalized in this final rule. 

The ESRD QIP impact assessment 

assumes an initial count of 5,596 

dialysis providers/facilities with paid 

Medicare dialysis claims in 2010. The 

PPS analysis, presented earlier, 

excludes 93 facilities for PPS-specific 

reasons thereby narrowing the final 

analytic sample to 5,503. The most 

common reason for exclusion was that 

facilities closed during 2010. As a 

result, Table 9 shows the overall 

estimated distribution of payment 

reductions resulting from the PY 2013 

ESRD QIP. Table 10 shows the overall 

estimated distribution of payment 

reductions resulting from the PY 2014 

ESRD QIP. 


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25PY 2014 QIP Scores estimated using the 

Hemoglobin > 12 g/dl and Urea Reduction Ratio ≥ 

65 percent measures, as well as data from the Fistula First initiative as a proxy for the VAT 

measure. 

To estimate the total payment 

reductions in PY 2013 and PY 2014 for 

each provider/facility resulting from 

this final rule, we multiplied the total 

Medicare payments to the facility in 

2010 by the provider’s/facility’s 

estimated payment reduction percentage 

expected under the ESRD QIP, yielding 

a total payment reduction amount for 

each provider/facility: (Total ESRD 

payment in 2010 × estimated payment 

reduction percentage). 

The PY 2014 payment reduction 

levels will include the 0.5 percent 

payment reduction level as an 

additional level within the payment 

reduction scale. We are finalizing new 

measures, a new scoring methodology, 

and rigorous performance standards 

which are not familiar to the 

community. We believe that including 

this additional payment reduction level 

will allow time for providers/facilities 

to become familiar with this new 

structure and for CMS to acquire 

additional data on the impact of these 

changes. The inclusion of the 0.5 

percent payment reduction level creates 

a more gradual payment reduction scale, 

and therefore benefits providers by 

lessening the reduction impacts that 

would have been received under the 

original proposed scale. 

For PY 2013, totaling all of the 

payment reductions for each of the 

1,014 providers/facilities expected to 

receive a reduction leads to a total 

payment reduction of approximately 

$23.7 million. Further, we estimate that 

the total costs associated with the 

collection of information requirements 

described in section III.1, of this final 

rule (Display of Certificates for the PY 

2013 ESRD QIP) would be less than 

$400,000 for all ESRD providers/ 

facilities in PY 2013. 

For PY 2014, totaling all of the 

payment reductions for each of the 

1,665 facilities expected to receive a 

reduction leads to a total payment 

reduction of approximately $22.1 

million. Further, we estimate that the 

total costs associated with the collection 

of information requirements described 

in sections III.1. (Display of Certificates 

for the PY 2013 and PY 2014 ESRD 

QIP), III.2 (NHSN Reporting 

Requirement for the PY 2014 ESRD 

QIP), III.3 (Patient Experience Survey 

Usage Reporting Requirement for the PY 

2014 ESRD QIP) and III.4 (Mineral 

Metabolism Reporting Requirement for 

the PY 2014 ESRD QIP) of this final rule 

would be less than $25 million for all 

ESRD providers/facilities. 

As a result, we estimate that ESRD 

providers/facilities will experience an 

aggregate impact of $24.1 million for PY 

2013 and $47.1 million for PY 2014. 

Table 11 below shows the estimated 

impact of the finalized ESRD QIP 

payment reductions to all ESRD 

facilities for PY 2013. The table details 

the distribution of ESRD providers/ 

facilities by facility size (both among 

facilities considered to be small entities 

and by number of treatments per 

facility), geography (both urban/rural 

and by region), and by facility type 

(hospital based/freestanding facilities). 

BILLING CODE 4120–01–P 


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We note that for the PY 2014 ESRD 

QIP we lack performance data on the 

Vascular Access Type measure to 

conduct an analysis at this time. We 

conducted a simulation using the latest 

available performance data on the 

Hemoglobin Greater Than 12 g/dL 

measure, and the Dialysis Adequacy 

(URR) measure and fistula and catheter 

rates based on Fistula First data to 

estimate the impact of this final rule as 

accurately as possible. These simulated 

analyses were performed using 2010 

claims data as the performance year and 

2009 claims data as the baseline year for 

the Hemoglobin Greater Than 12g/dL 

measure and the Dialysis Adequacy 

Measure (URR). 

Using these conditions, we calculated 

estimated national achievement 

threshold and benchmark values for the 

Hemoglobin Greater Than 12 g/dL, URR 

Hemodilaysis Adequacy, and VAT 

measures using all facilities present in 

the data set. Equal weighting was 

applied in calculating Total 

Performance Scores. Facilities were 

required to have data on at least one of 

the measures. Given the lack of data for 

the reporting measures, and the use of 

Fistula First data, the actual impact of 

the PY 2014 ESRD QIP may vary 

significantly from the values provided 

here. 

Using the above assumptions, Table 

12 below shows the estimated impact of 

the ESRD QIP payment reductions to all 

ESRD facilities for PY 2014. The table 

details the distribution of ESRD 

providers/facilities by facility size (both 

among facilities considered to be small 

entities and by number of treatments per 

facility), geography (both urban/rural 

and by region), and by facility type 

(hospital based/freestanding facilities). 


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BILLING CODE 4120–01–C 

b. Alternatives Considered for the PY 

2013 and PY 2014 ESRD QIP 

In developing the final PY 2013 ESRD 

QIP, we carefully considered the size of 

the incentive to providers and facilities 

to provide high-quality care. We also 

selected the measures adopted for the 

PY 2013 ESRD QIP because these 

measures are important indicators of 

patient outcomes and quality of care. 

For example, inadequate dialysis can 

lead to avoidable hospitalizations, 

decreased quality of life, and death. 

Thus, we believe the measures selected 

will allow CMS to continue focusing on 

improving the quality of care that 

Medicare beneficiaries receive from 

ESRD dialysis providers and facilities. 

Additionally, for PY 2013 we 

considered whether to leave the 

Hemoglobin Measure Less Than 10g/dL 

in the program. Ultimately we decided 

that the clinical evidence shows that 

this measure is not conducive to 

improving the patient quality of care for 

which the ESRD QIP strives. The ESA 

labeling approved by the FDA on June 

24, 2011 states that no trial has 

identified a hemoglobin target level that 

does not increase risks, and that ‘‘in 

controlled trials, patients experienced 

greater risks for death, serious adverse 

cardiovascular reactions, and stroke 

when administered ESAs to target a 

hemoglobin level of greater than 

11 g/dL.’’ We decided to retire the 

Hemoglobin Less Than 10g/dL measure 

from the program and are finalizing that 

proposal in this final rule. 

This final rule implements an ESRD 

QIP for Medicare ESRD dialysis 

providers and facilities with payment 

reductions beginning January 1, 2013 

and January 1, 2014. Under section 

1881(h) of the Act, after selecting 

measures, establishing performance 

standards that apply to each of the 

measures, specifying a performance 

period, and developing a methodology 

for assessing the total performance of 

each provider and facility based on the 

specified performance standards, the 

Secretary is required to apply an 

appropriate reduction to ESRD 

providers and facilities that do not meet 

or exceed the established Total 

Performance Score. In developing the 

final ESRD QIP, we carefully considered 

the size of the incentive to providers 

and facilities to provide high-quality 

care. We also considered finalizing all of 

the measures proposed for the PY 2014 

ESRD QIP because these measures are 

important indicators of patient 

outcomes and quality of care. Poor 

management of anemia and inadequate 

dialysis, for example, can lead to 

avoidable hospitalizations, decreased 

quality of life, and death. Infections are 

also a leading cause of death and 

hospitalization among hemodialysis 

patients, but there are proven infection 

control methods that have been shown 

effective in reducing morbidity and 

mortality. However, after considering 

public comments, we decided not to 

finalize all the measures we proposed. 

While we intend to adopt additional 

measures in future payment years, we 

believe that the measures finalized will 

allow us to continue focusing on 

improving the quality of care that 

Medicare beneficiaries receive from 

ESRD dialysis providers and facilities. 

In finalizing the scoring methodology 

for the PY 2014 ESRD QIP, we 

considered a number of alternatives, 

including continuing to use the existing 

scoring model. In proposing to move to 

a new scoring approach for the PY 2014 

ESRD QIP, we aimed to design a scoring 

methodology that was straightforward 

and transparent to providers/facilities, 

patients, and other stakeholders. During 

the public comment period, we received 

comments on the Total Performance 

Score as proposed, and in light of those 

concerns, we have adjusted how we set 

the minimum Total Performance Score. 

Rather than set the minimum Total 

Performance Score as the score a 

provider/facility would receive if it had 

met the performance standards for each 

finalized measure, we will define the 

minimum Total Performance Score as 

the score a provider/facility would 

receive if it had met the performance 

standards for each of the finalized 

clinical measures. In recognition of 

commenter concerns regarding the 

proposed reporting measures, and our 

lack of data on which to approximate 

likely provider/facility performance, we 

will exclude these measures from the 

calculation of the minimum Total 

Performance Score. We believe this 

policy balances our desire to 

appropriately incentivize improvements 

to clinical quality of care while ensuring 

that providers/facilities are not unduly 

penalized. 

Furthermore, although we believe that 

the ESRD QIP should provide a means 

for patients to evaluate their providers/ 

facilities over time, we do not believe 

that PY 2014 will be comparable to 

previous years of the ESRD QIP because 

of the significant changes to the scoring 

methodology and measures. We believe 

the 100 point scale will accommodate 

the growing number of measures that 

may be adopted in future years of the 

ESRD QIP and plan to consistently use 

the 100 point scale going forward. 


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Additionally, we believe that all 

scoring methodologies for Medicare 

Value-Based Purchasing programs 

should be aligned as appropriate given 

their specific statutory requirements, 

and that the changes made to the 

proposed methodology in this final rule 

are in keeping with this approach. 

The comments we received on this 

analysis and our responses are set forth 

below. 

Comment: One commenter asked 

CMS to explain why rural and urban 

facilities will be affected differently by 

the PY 2013 and PY 2014 ESRD QIP. 

This commenter specifically asked why 

those providers/facilities not receiving 

scores because of, for example, 

inadequate data varied from PY 2013 to 

PY 2014. This commenter urged CMS to 

change its methodology to encompass as 

many facilities as possible in the ESRD 

QIP. This commenter also requested the 

CMS explain why more payment 

reductions will likely result from PY 

2014. 

Response: The estimates of the impact 

for both PY 2013 and PY 2014 of the 

proposed rule we developed were 

created by modeling how providers/ 

facilities would have scored on the 

ESRD QIP using data from 2008 and 

2009. While these estimates did show a 

slight difference in the average payment 

reduction between urban and rural 

facilities for PY 2013 and PY 2014, we 

believe that these differences are 

relatively minor. While these estimates 

have changed since we used more 

recent data (2009 and 2010) and 

adjusted the model to account for 

changes to the program in this final rule, 

we still believe that the differences will 

be relatively minor. We expect all 

facilities to provide quality care, 

particularly in the important areas of 

anemia management and dialysis 

adequacy, regardless of size or 

geographic location. We will continue to 

monitor and evaluate the impact of the 

ESRD QIP on access to and quality to 

care and the quality of care received by 

Medicare ESRD beneficiaries, including 

indicators of facility financial health, to 

identify any disruptions or to make 

future improvements in the program. In 

light of our finalized proposal that every 

provider/facility will receive a Total 

Performance Score as long as at least 

one measure applies to it, we believe 

that nearly all providers/facilities will 

be included in the ESRD QIP. Lastly, we 

do not believe that payment reductions 

will be significantly greater in PY 2014. 

As seen from the estimates above, we 

believe that payment reductions will be 

$23.7 million for PY 2013 and $22.1 

million for PY 2014. To the extent that 

this number decreases somewhat in PY 

2014, we believe this is appropriate 

given that providers/facilities will be 

adjusting to a dramatically different 

program with new measures. 

3. Ambulance Fee Schedule 

Section 106 of the Medicare and 

Medicaid Extenders Act of 2010 

(MMEA) 

As discussed in section III of this final 

rule, section 106 of the MMEA requires 

the extension of certain add-on 

payments for ground ambulance 

services, and the extension of certain 

rural area designations for purposes of 

air ambulance payment, through CY 

2011. As further discussed in section III 

of this final rule, we are amending the 

Medicare program regulations to 

conform the regulations to this section 

of the MMEA. This MMEA section is 

essentially prescriptive and does not 

allow for discretionary alternatives on 

the part of the Secretary. 

As discussed in the July 1, 2004 

interim final rule (69 FR 40288), in 

determining the super-rural bonus 

amount under section 1834(l)(12) of the 

Act, we followed the statutory guidance 

of using the data from the Comptroller 

General (GAO) of the U.S. We obtained 

the same data that were used in the 

GAO’s September 2003 Report titled, 

‘‘Ambulance Services: Medicare 

Payments Can Be Better Targeted to 

Trips in Less Densely Populated Rural 

Areas’’ (GAO report number GAO–03– 

986) and used the same general 

methodology in a regression analysis as 

was used in that report. The result was 

that the average cost per trip in the 

lowest quartile of rural county 

populations was 22.6 percent higher 

than the average cost per trip in the 

highest quartile. As required by section 

1834(l)(12) of the Act, this percent 

increase is applied to the base rate for 

ground ambulance transports that 

originate in qualified rural areas, which 

were identified using the methodology 

set forth in the statute. Payments for 

ambulance services under Medicare are 

determined by the point of pick-up (by 

zip code area) where the beneficiary is 

loaded on board the ambulance. 

We determined that ground 

ambulance transports originating in 

7,842 zip code areas (which were 

determined to be in ‘‘qualified rural 

areas’’) out of 42,879 zip code areas, 

according to the July 2010 zip code file, 

will realize increased base rate 

payments under section 106(c) of the 

MMEA for CY 2011; however, the 

number and level of services that might 

occur in these areas for CY 2011 is 

unknown at this time. Similarly, for 

purposes of assessing the impact of 

MMEA section 106(a) and (b), the 

number and level of services that might 

occur during CY 2011 in rural and 

urban areas generally is unknown at this 

time. While many elements may factor 

into the final impact of section 106 of 

the MMEA, our Office of the Actuary 

(OACT) estimates the impact of this 

section to be $20 million for CY 2011. 

4. Durable Medical Equipment (DME) 

and Supplies 

The fiscal impact of the final 3-year 

MLR for DME will be minimal because 

we believe that this standard is 

consistent with our current 

interpretation of the payment and 

repeated use provisions for DME. It is 

difficult to predict how many different 

types of new devices will be introduced 

in the market in the future that may or 

may not meet the 3-year MLR. However, 

even absent the final rule, it is likely 

that new products which do not meet 

the 3-year MLR will not qualify as DME 

based upon our current interpretation of 

the criteria for DME. It is possible that 

with the clarification of the 3-year MLR, 

we will limit what can be covered as 

DME compared to what we would have 

covered as DME absent this regulatory 

clarification. To the extent the 

regulatory change is binding to some 

new products, there may be reduced 

program cost. Also, the final revised 

regulation does not apply to items that 

were classified as DME before the 

effective date of the amended 

regulation, which tends to lessen the 

overall impact to the program. In 

general, we expect that this final will 

have a small, if any, savings impact on 

the program. We are finalizing the rule 

with no modifications. 

5. The Competitive Acquisition Program 

for Certain Durable Medical Equipment, 

Prosthetics, Orthotics and Supplies 

(DMEPOS) 

As discussed in section V of this final 

rule, section 154 of MIPPA amended 

section 1847 of the Act to make limited 

changes to the Medicare DMEPOS 

Competitive Bidding Program. These 

changes were incorporated into 

regulations through an interim final rule 

with comment period published in the 

Federal Register on January 16, 2009 

(74 FR 2873). The interim final rule 

merely incorporated limited statutory 

changes to the Medicare DMEPOS 

Competitive Bidding Program and did 

not change the fundamental 

requirements of the program. 

Specifically, this final rule cites the new 

timeframes for competition under the 

program. In addition, the rule 

implements the MIPPA provisions that 

mandated limited changes that affected 


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competition under the program 

including a process for providing 

feedback to suppliers regarding missing 

financial documentation, requiring 

contractors to disclose to CMS 

information regarding subcontracting 

relationships, and exempting from 

competitive bidding certain items and 

services. These changes are not 

economically significant. Furthermore, 

because the regulation simply codifies 

the MIPPA provisions, we do not have 

the authority to consider alternatives. 

C. Accounting Statement 

As required by OMB Circular A–4 

(available at http:// 

www.whitehouse.gov/omb/ 

circulars_a004_a-4), in Table 13 below, 

we have prepared an accounting 

statement showing the classification of 

the transfers and costs associated with 

the various provisions of this final rule. 

BILLING CODE 4120–01–P 

BILLING CODE 4120–C 

VIII. Regulatory Flexibility Act 

Analysis 

The Regulatory Flexibility Act 

(September 19, 1980, Pub. L. 96– 

354)(RFA) requires agencies to analyze 

options for regulatory relief of small 

entities, if a rule has a significant impact 

on a substantial number of small 

entities. For purposes of the RFA, small 

entities include small businesses, 

nonprofit organizations, and small 

governmental jurisdictions. 

Approximately 20 percent of ESRD 

dialysis facilities are considered small 

entities according to the Small Business 

Administration’s size standards, which 

classifies small businesses as those 

dialysis facilities having total revenues 

of less than $34.5 million in any 1 year. 

Individuals and States are not included 

in the definitions of a small entity and 

17 percent of dialysis facilities are 

nonprofit organizations. For more 

information on SBA’s size standards, 

see the Small Business Administration’s 

Web site at http://sba.gov/idc/groups/ 

public/documents/sba_homepage/ 

serv_sstd_tablepdf.pdf (Kidney Dialysis 


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Centers are listed as 621492 with a size 

standard of $34.5 million). 

The claims data used to estimate 

payments to ESRD facilities in this RFA 

and RIA do not identify which dialysis 

facilities are part of a large dialysis 

organization (LDO), regional chain, or 

other type of ownership. Each 

individual dialysis facility has its own 

provider number and bills Medicare 

using this number. Therefore, in 

previous RFAs and RIAs presented in 

proposed and final rules that updated 

the basic case-mix adjusted composite 

payment system, we considered each 

ESRD to be a small entity for purposes 

of the RFA. However, we conducted a 

special analysis for this final rule that 

enabled us to identify the ESRD 

facilities that are part of an LDO or 

regional chain and therefore, were able 

to identify individual ESRD facilities, 

regardless of ownership, that would be 

considered small entities. 

We do not believe ESRD facilities are 

operated by small government entities 

such as counties or towns with 

populations 50,000 or less and 

therefore, they are not enumerated or 

included in this estimated RFA. 

Individuals and States are not included 

in the definition of a small entity. 

For purposes of the RFA, we estimate 

that approximately 20 percent of ESRD 

facilities are small entities as that term 

is used in the RFA (which includes 

small businesses, nonprofit 

organizations, and small governmental 

jurisdictions). This amount is based on 

the number of ESRD facilities shown in 

the ownership category in the impact 

Table 12. Using the definitions in this 

ownership category, we consider the 

663 facilities that are independent and 

the 437 facilities that are shown as 

hospital-based to be small entities. The 

ESRD facilities that are owned and 

operated by LDOs and regional chains 

would have total revenues more than 

$34.5 million in any year when the total 

revenues for all locations are combined 

for each business (individual LDO or 

regional chain) are not included as 

small entities. 

For the ESRD PPS updates finalized 

in this rule, a hospital-based ESRD 

facility (as defined by ownership type) 

is estimated to receive a 2.3 percent 

increase in payments for CY 2012. An 

independent facility (as defined by 

ownership type) is estimated to receive 

a 2.3 percent increase in payments for 

2012. 

Based on the finalized QIP payment 

reduction impacts to ESRD facilities for 

PY 2013, we estimate that of the 2,059 

ESRD facilities expected to receive a 

payment reduction, 385 ESRD small 

entity facilities would experience a 

payment reduction (ranging from 0.5 

percent up to 2.0 of total payments), as 

presented in Table 11 above. We 

anticipate the payment reductions to 

average approximately $22,934 per 

facility, with an average of $23,807 per 

small entity. Using our projections of 

provider/facility performance, we then 

estimated the impact of anticipated 

payment reductions on ESRD small 

entities, by comparing the total payment 

reductions for the 385 small entities 

expected to receive a payment 

reduction, with the aggregate ESRD 

payments to all small entities. For the 

entire group of 1,054 ESRD small entity 

facilities, a decrease of 0.57 percent in 

aggregate ESRD payments is observed. 

Furthermore, based on the finalized 

QIP payment reduction impacts to ESRD 

facilities for PY 2014, we estimate that 

of the 737 ESRD entity facilities 

expected to receive a payment 

reduction, 132 small entities are 

expected to experience a payment 

reduction (ranging from 1.0 percent up 

to 2.0 of total payments), as presented 

in Table 11 above. We anticipate the 

payment reductions to average 

approximately $18,820 per facility, with 

an average of $20,436 per small entity 

facility. Using our projections of 

provider/facility performance, we then 

estimated the impact of anticipated 

payment reductions on small entities, 

by comparing the total payment 

reductions for the 132 small entities 

expected to receive a payment 

reduction, with the aggregate ESRD 

payments to all small entities. For the 

entire group of 1,054 small entity 

facilities, a decrease of 0.16 percent in 

aggregate ESRD payments is observed. 

Therefore, the Secretary has 

determined that this final rule will not 

have a significant economic impact on 

a substantial number of small entities. 

We solicit comment on the RFA analysis 

provided. 

Finally, based on data from the Small 

Business Administration (SBA), we 

estimate that 85 percent of the suppliers 

of the items and services affected by the 

changes to the Medicare DMEPOS 

Competitive Bidding Program would be 

defined as small entities with total 

revenues of $6.5 million or less in any 

1 year. This final rule merely codifies 

MIPPA provisions, so there are no 

options for regulatory relief for small 

suppliers. The RFA therefore does not 

require that we analyze regulatory 

options in this instance. 

In addition, section 1102(b) of the Act 

requires us to prepare a regulatory 

impact analysis if a rule may have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. Any such regulatory impact 

analysis must conform to the provisions 

of section 604 of the RFA. For purposes 

of section 1102(b) of the Act, we define 

a small rural hospital as a hospital that 

is located outside of a metropolitan 

statistical area and has fewer than 100 

beds. We do not believe this final rule 

will have a significant impact on 

operations of a substantial number of 

small rural hospitals because most 

dialysis facilities are freestanding. 

While there are 178 rural hospital-based 

dialysis facilities, we do not know how 

many of them are based at hospitals 

with fewer than 100 beds. However, 

overall, the 178 rural hospital-based 

dialysis facilities will experience an 

estimated 2.3 percent increase in 

payments. As a result, this final rule is 

estimated to not have a significant 

impact on small rural hospitals. 

Therefore, the Secretary has determined 

that this proposed rule will not have a 

significant impact on the operations of 

a substantial number of small rural 

hospitals. 

IX. Unfunded Mandates Reform Act 

Analysis 

Section 202 of the Unfunded 

Mandates Reform Act of 1995 (UMRA) 

(Pub. L. 104–4) also requires that 

agencies assess anticipated costs and 

benefits before issuing any rule whose 

mandates require spending in any 1 year 

$100 million in 1995 dollars, updated 

annually for inflation. In 2011, that 

threshold is approximately $136 

million. This final rule does not include 

any mandates that would impose 

spending costs on State, local, or Tribal 

governments in the aggregate, or by the 

private sector, of $136 million. 

X. Federalism Analysis 

Executive Order 13132 on Federalism 

(August 4, 1999) establishes certain 

requirements that an agency must meet 

when it promulgates a final rule (and 

subsequent final rule) that imposes 

substantial direct requirement costs on 

State and local governments, preempts 

State law, or otherwise has Federalism 

implications. We have reviewed this 

final rule under the threshold criteria of 

Executive Order 13132, Federalism, and 

have determined that it will not have 

substantial direct effects on the rights, 

roles, and responsibilities of States, 

local or Tribal governments. 

XI. Files Available to the Public via the 

Internet 

This section lists the Addenda 

referred to in the preamble of this final. 

Beginning in CY 2012, the Addenda for 

the annual ESRD PPS proposed and 

final rulemakings will no longer appear 

in the Federal Register. Instead, the 


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70314 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

Addenda will be available only through 

the Internet. We will continue to post 

the Addenda through the Internet. 

Readers who experience any problems 

accessing the Addenda that are posted 

on the CMS Web site at http:// 

www.cms.gov/ESRDPayment/PAY/ 

list.asp, should contact Lisa Hubbard at 

(410) 786–4533. 

List of Subjects 

42 CFR Part 413 

Health facilities, Kidney diseases, 

Medicare, Reporting and recordkeeping 

requirements. 

42 CFR Part 414 

Proposed Rule to revise the definition 

of durable medical equipment (DME) to 

incorporate a minimum lifetime 

standard of 3 years and further refine 

the meaning of the term durable. 

For the reasons set forth in the 

preamble, under the authority at 42 

U.S.C. 1395hh section 1871 of the Act, 

the Centers for Medicare & Medicaid 

Services confirms as final, the interim 

final rules published on January 16, 

2009 (74 FR 2873), and April 6, 2011 (76 

FR 18930), and further amends 42 CFR 

chapter IV as set forth below: 

PART 413—PRINCIPLES OF 

REASONABLE COST 

REIMBURSEMENT; PAYMENT FOR 

END-STAGE RENAL DISEASE 

SERVICES; OPTIONAL 

PROSPECTIVELY DETERMINED 

PAYMENT RATES FOR SKILLED 

NURSING FACILITIES 

■ 1. The authority citation for part 413 

continues to read as follows: 

Authority: Secs. 1102, 1812(d), 1814(b), 

1815, 1833(a), (i), and (n), 1861(v), 1871, 

1881, 1883, and 1886 of the Social Security 

Act (42 U.S.C. 1302, 1395d(d), 1395f(b), 

1395(g), 1395I(a), (i), and (n), 1395x(v), 

1395hh, 1395rr, 1395tt, and 1395ww); and 

sec. 124 of Public Law 106–113 (133 stat. 

1501A–332). 

■ 2. Section 413.232 is amended by 

revising paragraphs (b)(1), (b)(2), and (f) 

to read as follows: 

§ 413.232 Low-volume adjustment. 

(a) * * * 

(b) * * * 

(1) Furnished less than 4,000 

treatments in each of the 3 cost 

reporting years (based on as-filed or 

final settled 12-consecutive month cost 

reports, whichever is most recent) 

preceding the payment year; and 

(2) Has not opened, closed, or 

received a new provider number due to 

a change in ownership in the 3 cost 

reporting years (based on as-filed or 

final settled 12-consecutive month cost 

reports, whichever is most recent) 

preceding the payment year. 

* * * * * 

(f) Except as provided below, to 

receive the low-volume adjustment an 

ESRD facility must provide an 

attestation statement, by November 1st 

of each year preceding the payment 

year, to its Medicare administrative 

contractor that the facility has met all 

the criteria established in paragraphs 

(a), (b), (c), and (d) of this section. For 

calendar year 2012, the attestation must 

be provided by January 3, 2012. 

* * * * * 

■ 3. Section 413.237 is amended by 

adding a new paragraph (a)(1)(v) to read 

as follows: 

§ 413.237 Outliers. 

(a) * * * 

(1) * * * 

(v) As of January 1, 2012, the 

laboratory tests that comprise the 

Automated Multi-Channel Chemistry 

panel are excluded from the definition 

of outlier services. 

* * * * * 

PART 414—PAYMENT FOR PART B 

MEDICAL AND OTHER HEALTH 

SERVICES 

■ 4. The authority citation for part 414 

continues to read as follows: 

Authority: Secs. 1102, 1871, and 1881(b)(l) 

of the Social Security Act (42 U.S.C. 1302, 

1395hh, and 1395rr(b)(l)). 

Subpart D—Payment for Durable 

Medical Equipment and Prosthetic and 

Orthotic Devices 

■ 5. Section 414.202 is amended by 

revising the definition of ‘‘durable 

medical equipment’’ to read as follows: 

§ 414.202 Definitions. 

* * * * * 

Durable medical equipment means 

equipment, furnished by a supplier or a 

home health agency that meets the 

following conditions: 

(1) Can withstand repeated use. 

(2) Effective with respect to items 

classified as DME after January 1, 2012, 

has an expected life of at least 3 years. 

(3) Is primarily and customarily used 

to serve a medical purpose. 

(4) Generally is not useful to an 

individual in the absence of an illness 

or injury. 

(5) Is appropriate for use in the home. 

* * * * * 

Subpart F—Competitive Bidding for 

Certain Durable Medical Equipment, 

Prosthetics, Orthotics, and Supplies 

(DMEPOS) 

■ 6. Section 414.402 is amended by— 

■ A. Revising the definitions of 

‘‘covered document’’ and ‘‘covered 

document review date’’ and ‘‘hospital’’. 

■ B. Revising the introductory text of 

paragraph (1) of the definition of 

‘‘item’’. 

§ 414.402 Definitions. 

* * * * * 

Covered document means a financial, 

tax, or other document required to be 

submitted by a bidder as part of an 

original bid submission under a 

competitive acquisition program in 

order to meet the required financial 

standards. 

Covered document review date means 

the later of— 

(1) The date that is 30 days before the 

final date for the closing of the bid 

window; or 

(2) The date that is 30 days after the 

opening of the bid window. 

* * * * * 

Hospital has the same meaning as in 

section 1861(e) of the Act. 

Item * * * 

(1) Durable medical equipment (DME) 

other than class III devices under the 

Federal Food, Drug and Cosmetic Act, 

as defined in § 414.202 of this part and 

group 3 complex rehabilitative 

wheelchairs and further classified into 

the following categories: 

* * * * * 

■ 7. Section 414.404 is amended by 

revising paragraphs (b)(1) introductory 

text, (b)(1)(ii), and (b)(1)(iii) to read as 

follows: 

§ 414.404 Scope and applicability. 

* * * * * 

(b) * * * 

(1) Physicians, treating practitioners, 

and hospitals may furnish certain types 

of competitively bid durable medical 

equipment without submitting a bid and 

being awarded a contract under this 

subpart, provided that all of the 

following conditions are satisfied: 

* * * * * 

(ii) The items are furnished by the 

physician or treating practitioner to his 

or her own patients as part of his or her 

professional service or by a hospital to 

its own patients during an admission or 

on the date of discharge. 

(iii) The items are billed under a 

billing number assigned to the hospital, 

physician, the treating practitioner (if 

possible), or a group practice to which 

the physician or treating practitioner 


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has reassigned the right to receive 

Medicare payment. 

* * * * * 

■ 8. Section 414.408 is amended by 

revising paragraph (e)(2)(iv) to read as 

follows: 

§ 414.408 Payment rules. 

* * * * * 

(e) * * * 

(2) * * * 

(iv) A physician, treating practitioner, 

physical therapist in private practice, 

occupational therapist in private 

practice, or hospital may furnish an 

item in accordance with § 414.404(b) of 

this subpart. 

* * * * * 

■ 9. Section 414.410 is amended by 

revising paragraphs (a)(1) through (3) to 

read as follows: 

§ 414.410 Phased-in implementation of 

competitive bidding programs. 

(a) Phase-in of competitive bidding 

programs. CMS phases in competitive 

bidding programs so that competition 

under the programs occurs— 

(1) In CY 2009, in Cincinnati— 

Middletown (Ohio, Kentucky and 

Indiana), Cleveland—Elyria—Mentor 

(Ohio), Charlotte—Gastonia—Concord 

(North Carolina and South Carolina), 

Dallas—Fort Worth—Arlington (Texas), 

Kansas City (Missouri and Kansas), 

Miami—Fort Lauderdale—Miami Beach 

(Florida), Orlando (Florida), Pittsburgh 

(Pennsylvania), and Riverside—San 

Bernardino—Ontario (California). 

(2) In CY 2011, in an additional 91 

MSAs (the additional 70 MSAs selected 

by CMS as of June 1, 2008, and the next 

21 largest MSAs by total population 

based on 2009 population estimates, 

and not already phased in as of June 1, 

2008). CMS may subdivide any of the 91 

MSAs with a population of greater than 

8,000,000 into separate CBAs, thereby 

resulting in more than 91 CBAs. 

(3) After CY 2011, additional CBAs 

(or, in the case of national mail order for 

items and services, after CY 2010). 

* * * * * 

■ 10. Section 414.414 is amended by 

revising paragraph (c) and (d) as 

follows: 

§ 414.414 Conditions for awarding 

contracts. 

* * * * * 

(c) Quality standards and 

accreditation. Each supplier furnishing 

items and services directly or as a 

subcontractor must meet applicable 

quality standards developed by CMS in 

accordance with section 1834(a)(20) of 

the Act and be accredited by a CMSapproved organization that meets the 

requirements of § 424.58 of this 

subchapter, unless a grace period is 

specified by CMS. 

(d) Financial standards. (1) General 

rule. Each supplier must submit along 

with its bid the applicable covered 

documents (as defined in § 414.402) 

specified in the request for bids. 

(2) Process for reviewing covered 

documents. (i) Submission of covered 

documents for CMS review. To receive 

notification of whether there are missing 

covered documents, the supplier must 

submit its applicable covered 

documents by the later of the following 

covered document review dates: 

(A) The date that is 30 days before the 

final date for the closing of the bid 

window; or 

(B) The date that is 30 days after the 

opening of the bid window. 

(ii) CMS feedback to a supplier with 

missing covered documents. (A) For 

Round 1 bids. CMS has up to 45 days 

after the covered document review date 

to review the covered documents and to 

notify suppliers of any missing 

documents. 

(B) For subsequent Round bids. CMS 

has 90 days after the covered document 

review date to notify suppliers of any 

missing covered documents. 

(iii) Submission of missing covered 

documents. Suppliers notified by CMS 

of missing covered documents have 10 

business days after the date of such 

notice to submit the missing documents. 

CMS does not reject the supplier’s bid 

on the basis that the covered documents 

are late or missing if all the applicable 

missing covered documents identified 

in the notice are submitted to CMS not 

later than 10 business days after the date 

of such notice. 

* * * * * 

■ 11. Section 414.422 is amended by 

revising paragraph (f) to read as follows: 

§ 414.422 Terms of contracts. 

* * * * * 

(f) Disclosure of subcontracting 

arrangements. (1) Initial disclosure. Not 

later than 10 days after the date a 

supplier enters into a contract under 

this section the supplier must disclose 

information on both of the following: 

(i) Each subcontracting arrangement 

that the supplier has in furnishing items 

and services under the contract. 

(ii) Whether each subcontractor meets 

the requirement of section 

1834(a)(20)(F)(i) of the Act if applicable 

to such subcontractor. 

(2) Subsequent disclosure. Not later 

than 10 days after the date a supplier 

enters into a subcontracting 

arrangement subsequent to contract 

award with CMS, the supplier must 

disclose information on both of the 

following: 

(i) The subcontracting arrangement 

that the supplier has in furnishing items 

and services under the contract. 

(ii) Whether the subcontractor meets 

the requirement of section 

1834(a)(20)(F)(i) of the Act, if applicable 

to such subcontractor. 

* * * * * 

Subpart H—Fee Schedule for 

Ambulance Services 

■ 12. Section 414.610 is amended by 

revising paragraphs (c)(1) introductory 

text, (c)(1)(ii), (c)(5)(ii), and (h) to read 

as follows: 

§ 414.610 Basis of payments. 

* * * * * 

(c) * * * 

(1) Ground ambulance service levels. 

The CF is multiplied by the applicable 

RVUs for each level of service to 

produce a service-level base rate. 

* * * * * 

(ii) For services furnished during the 

period July 1, 2008 through December 

31, 2011, ambulance services originating 

in— 

* * * * * 

(5) * * * 

(ii) For services furnished during the 

period July 1, 2004 through December 

31, 2011, the payment amount for the 

ground ambulance base rate is increased 

by 22.6 percent where the point of 

pickup is in a rural area determined to 

be in the lowest 25 percent of rural 

population arrayed by population 

density. The amount of this increase is 

based on CMS’s estimate of the ratio of 

the average cost per trip for the rural 

areas in the lowest quartile of 

population compared to the average cost 

per trip for the rural areas in the highest 

quartile of population. In making this 

estimate, CMS may use data provided 

by the GAO. 

* * * * * 

(h) Treatment of certain areas for 

payment for air ambulance services. 

Any area that was designated as a rural 

area for purposes of making payments 

under the ambulance fee schedule for 

air ambulance services furnished on 

December 31, 2006, must be treated as 

a rural area for purposes of making 

payments under the ambulance fee 

schedule for air ambulance services 

furnished during the period July 1, 

2008, through December 31, 2011. 

(Catalog of Federal Domestic Assistance 

Program No. 93.773, Medicare—Hospital 

Insurance; and Program No. 93.774, 

Medicare—Supplementary Medical 

Insurance Program) 


emcdonald on DSK5VPTVN1PROD with RULES2
70316 Federal Register / Vol. 76, No. 218 / Thursday, November 10, 2011 / Rules and Regulations 

Dated: October 26, 2011. 

Donald M. Berwick, 

Administrator, Centers for Medicare & 

Medicaid Services. 

Approved: October 31, 2011. 

Kathleen Sebelius, 

Secretary, Department of Health and Human 

Services. 

[FR Doc. 2011–28606 Filed 11–1–11; 4:15 pm] 

BILLING CODE 4120–01–P 


emcdonald on DSK5VPTVN1PROD with RULES2